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Law School Corner

Statute Analysis: Arbitration And Conciliation (Amendment) Act, 2019

Samridhi Bhatt
19 Jun 2021 5:51 AM GMT
Statute Analysis: Arbitration And Conciliation (Amendment) Act, 2019
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Arbitration is an instrument of dispute resolution which renders an "Arbitral award" by an unbiased/neutral person referred to as an "Arbitrator". The reason behind opting for such a mode for rendering justice is its approachability, time flexibility, and non-complexity in regards to the procedure. However, even after holding such central characteristics for providing an award to...

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Arbitration is an instrument of dispute resolution which renders an "Arbitral award" by an unbiased/neutral person referred to as an "Arbitrator". The reason behind opting for such a mode for rendering justice is its approachability, time flexibility, and non-complexity in regards to the procedure. However, even after holding such central characteristics for providing an award to the parties, in India, litigants still believe to scratch their shoes before the Court of law to attain justice within no period limitation, due to which, consequently, the matters go on for years, which in turn lead the Indian lawmakers to build a solid structure in the arena of Arbitration and strode on the direction which shall make a country like India a "Hub portal" of Arbitration.

The lawmakers enacted various enactments in the arena of Arbitration, by the ebb of time, accordingly made amendments in personae for purging the intricacies involved in the previous acts. The Arbitration and Conciliation (Amendment) Act, 2019 is the latest enactment that received Presidential approval on 9th August 2019. The Arbitration (Amendment) Act, 2019 is the amended version of the Arbitration and Conciliation Act, 2015, which eradicated vagueness and inconsistencies of the Arbitration Act 2015. The Arbitration (Amended) Act, 2019, at its core, emanated to reduce Judicial intervention, advancement arbitration progression, and institutionalize Arbitration which in turn will lead to formulating "Landmark space" for the International Commercial Arbitration.

This article encompasses the analysis of the statute Arbitration and Conciliation (Amendment) Act, 2019, under which all the amendment sections are discussed in detail.

History of Arbitration:

Recollecting the phase of 970 to 930 BCE, recognized as Solomon's reign, King Solomon settled a dispute of two women by way of arbitration mode and was known to be the first arbitrator at the earliest time. Thereupon, referring to the phase of 370 BC when Philip the king settled a provincial(territorial) dispute in Greece. Moreover, in the period 600 BC, matter in conflict of Salamis island came into being between city-states of Megara and Athens. Subsequently, the dispute appeared before the court of spartan by which resulted in Athens receiving power over Salamis's island. However, the same vanished in the following stage. Swiftly, the mode revolved again in the eighteenth and nineteenth centuries. Then came the Modern International arbitration, awoke from The Jay Treaty arbitration, induced to settle disputes for the American war of Independence. Therefore, conceding the above International states, the means of embracing Arbitration in solving different matters reveals its essence from the past period.

Inspired by the development in the arena of Arbitration in other countries, India invariably deemed to indulge in the venture from the past course to upgrade Arbitration by amending various enactments without inconsistencies. Arbitration in a country like India had its footprints from past events. Recollecting the process of the 'panchayat system' made it clear that India has never been new to such procedure and advancement. In India, the first step in enacting laws for arbitration took place by the Bengal regulation Act, 1772, to which it formulated the Modern Arbitration law 1772. This act also proclaimed to other presidential thorps viz; The state of Bombay and Madras. By the period of 19th century, India boosted in the arena of arbitration, which in turn resulted in the first-ever making enactment of The Indian Arbitration Act, 1899, influenced by The British Arbitration Act, 1889. Accordingly, this Act was too promulgated to the presidential towns of Madras, Bombay, and Calcutta. This led to severe criticism that the Act lacks applicability to other states of British India. For the elimination of such intricacies, codification of section 89 and Schedule II of the CPC 1908 initiated for providing an extension of the arbitration provision to those states where the Act 1899 was not covered. However, the Act faced many complexities due to which it was of the dire need to enact an amended version resulting in Arbitration Act, 1940.

  • The Arbitration Act, 1940

This Act was influenced by The English Arbitration Act, 1934. As earlier discussed, the previous Act faced a lot of criticism which in turn resulted in the formation of a new amended version The Arbitration Act, 1940. The applicability of the Act extended to the whole of India, Pakistan, and Baluchistan. The significant reason behind bringing this Act was:

  1. Expeditious mitigation to parties.
  2. Rendering relief to the parties which were not covered by the Civil Procedure Code, 1908.
  3. Enforcement of Arbitration Agreement.

Criticism

Nevertheless, even after holding a definite purpose, the Act failed of its whole to prove the essentials provided. Hence, this Act flunked to save itself from the stage of criticisms. The Criticisms was as follows:

  1. Not applicable to foreign Arbitration.
  2. No significant modifications were made as compared to the previous one.
  3. Out-dated Act, as analysed from other developed nations.
  4. Only dealt with the provisions relating to the enforcement of domestic awards and not foreign awards.

Also, in the case of Guru Nanak Foundation v Rattan Singh, the Court enunciated the malady in the process of the courts and the inefficient working system of the Act, to which they specified:

"Interminable, time consuming, complex and expensive Court procedures impelled jurists to search for an alternative Forum, less formal, more effective and speedier for resolution of disputes, avoiding procedural claptrap and this led them to Arbitration Act, 1940. However, how the proceedings under the Act are conducted and without exception challenged in Courts, has made Lawyers laugh and legal philosophers weep."

  • The Arbitration and Conciliation Act, 1996

In the year 1996, the Government of India enacted Arbitration and Conciliation Act, 1996, with the object to focus not only on domestic but also on international arbitration. This Act has its root originated from the UNICITRAL Model Law on International Commercial Arbitration, 1985 & the UNCITRAL Arbitration Rules, 1976. This Act was the modified version of the Arbitration Act, 1940, with the view of delivering a significant purpose that has not been covered by the previous Act. The fundamental essence of this amended enactment was to balance the municipal law of arbitration with the International level of arbitration of other countries. The purpose of the Act was to provide the following objectives:

  1. Speedy relief
  2. Enforcement of Arbitral award: Domestic as well as International disputes
  3. Limited Judicial Interference

Criticism

The lawmakers proposed the enactment to its most extensive sense, yet, the same turned out to have fetched more criticism as followed:

  1. That the arbitration still faced judicial interference.
  2. That the provision of the limitation period to deliver Arbitral award was not provided in the Act due to which the matters used to stretch for years.
  3. That the arbitrators used to charge an excessive amount of fee due to which the mode became much expensive to parties.
  4. Section 34: Hindrance to Arbitral Award: That the above section of the said Act has the power to cause an Arbitral Award un-exercisable just by the time when section 34 got executed by which, it automatically stays an Arbitral Award's execution.
  5. Seat Inside or out: There are judicial decisions enunciated on the subject matter as to whether apply Part I of the said Act to foreign seated arbitration to which in the case of Bhatia International v. Bulk Trading S.A. and Another & Global Engineering v Satyam Computer Services Ltd, the Supreme Court held that the applicability of Part I of the Act, 1996, will be implemented on foreign seated arbitration too, except, in case if the same was excluded in terms expressly or impliedly. This, in turn, led to the criticism that the approach applied to these judgments was retrogressing. Later, in the case of Bharat Aluminium and Co. v. Kaiser Aluminium and Co., the Supreme court while resolving the above issue held that, Part I and Part II of the said Act are dissimilar from each other to which the implementation of Part I to Part II of the Act will not be applicable. It was in regards to section 9 of the said Act that the section provides for Interim applications, and the same will not be entertained, in case, if the section applies to the foreign seated Arbitrations of Part II of the Act.
  • The Arbitration and Conciliation (Amendment) Act, 2015

This Act was the revised version of the Arbitration Act, 1996, wherein the requirements of the previous Act were enunciated into the Arbitration Act, 2015. There were various amendments enacted for better growth of Arbitration without inconsistencies. The following Amendments laid down in the Act are as follows:

  1. Section 9: Limit to Judicial interference: That an amendment got established for the institution of the arbitral tribunal. The section provides that, in the case, when there is an establishment of an arbitral tribunal, then there shall be no interference of the law of the Court to consider an application except certain conditions. Hence, this led to minimal interference of the Court in the Arbitration resolution system.
  2. Holding the same powers as the Court: That section 9 of the said amended Act, 2015 provided that the arbitral tribunal will have all powers as that of the Court. Also, section 17 of the previous Act got amended, according to which the power is provided to the arbitral tribunal to pass an order equivalent to that of the judicial authority.
  3. The limitation period to form Arbitral Award: That section 29A of the amended Act provided that after establishing an arbitral tribunal, the period to settle a dispute and deliver an arbitral award shall be within twelve months.
  4. Arbitral award when turned out to be contrary: That section 34 got amended according to which few conditions were given as for an arbitral award to shift contrary, the following are as follows:
  5. If the Arbitral award is against social and structural policies.
  6. If the Arbitral award is obtained through fraud/ corruption.
  7. If the Arbitral award is against equity, justice, and morality.

Also, in the case of BCCI, the apex Court provided that S.34 of the Act, 2015 can also be implemented to the continuing proceedings of Arbitration. Apart from this case, the Supreme Court also furnished in the context of the appointment of Arbitrators that for equity and justice, the interest holders in the arbitral matters hold no rights/powers to select an arbitrator.

Criticism

Even after insertions of the above significant amendments, the Act lacked various issues due to which it required an amended version to eliminate the inconsistencies and form a hub for the Institution's establishment of the Arbitration in India.

The modernized arbitration Act: The Arbitration and Conciliation (Amendment) Act, 2019

There was a dire need to amend the previous Act, 2015, the reason being-an inefficiency and various complexities. Hence, Mr. Ravi Shankar Prasad, the law minister of India, introduced The Arbitration and Conciliation (Amendment) Act, 2019, on 15th July 2019, in the upper house of parliament, and the same got enforced on 9th August 2019. This Act is a mixture of the Arbitration Act, 1996 and The Arbitration Act, 2015, in which the necessary provisions are modified for the better establishment of Arbitration in India. This Act ensures to have a successful setup of a hub of the Arbitration field in India. The aim of this Act in the arena of Arbitration is to:

  1. Lessen Judicial Interference.
  2. Develop Arbitration institutions and form measures for good growth.
  3. Settle disputes stemming from the Arbitration Act, 2015.

In the arena of Arbitration, the government of India and the Judicial system made their efforts to the fullest to step one way ahead and place Arbitration in balance with other nations. In an earlier case, a very crucial point was raised by Justice Sabyasachi Mukherji by which he enunciated how arbitration laws and their procedures should be, and, by the time, the same view was initiated by the legislatures to enact Arbitration laws. The Justice cogently explicated that, "We should make the law of arbitration simple, less technical and more responsible to the actual realities of the situation, but must be responsive to the canons of justice and fair play and make the arbitrator adhere to such process and norms which will create confidence, not only by doing justice between the parties but by creating a sense that justice appears to have been done."

Significant Amendments enunciated in the Amended Act, 2019

  1. Part 1A: Formulation of The Arbitration Council of India

The prime and the most significant amendment enunciated in the Act is the addition of Part 1A, which primarily relates to the formulation of The Arbitration Council in India. In making our country more active in the coliseum of Arbitration, it was crucial to build a system and concept in one notion to regulate the process of Arbitration.

The formulation of the Arbitration Council of India holds the objective of:

  • Assess the institution of Arbitration
  • Certification to Arbitrators
  • Recognized by the Central Government & headquartered in Delhi

The Arbitration Council of India itself is an independent foundation to keep an eye on the Institutions and rate them based on:

  • Substructure Facilities
  • Competence of the Arbitrators
  • Whether the Institutions are following the period of limitation to settle a dispute and deliver an Arbitral award?

Also, in support of Section 43 D of the Amended Act, 2019, the Arbitration Council's power has been widened to make guidelines and reforms according to which the institution will perform. The Council's essential work is to form regulations, plans, and strategies for the institutions. The only purpose behind these formations is to support, improve and develop all the respective modes of dispute resolutions. Furthermore, section 2 (ca) of the Amended Act renders the definition of "Arbitration Institution" according to which a power of designation of the institutions has been handed over to the Supreme Court and the High Court of India.[1] This amendment emphasizes to grant of control of selecting arbitrators from the Courts to the Arbitration Council. This articulates the best way of eliminating Judicial hands in the arena of dispute resolution. The authority of the court has been confined to the designation of the Institution rated by the Arbitration Council.

Members of the Council

The Arbitration Council is a governmental body due to which all the members are elected/selected by the CG, constituting Judicial officers, Arbitrators, officials, etc. The sequence according to which the Arbitration Council has instituted includes the following hierarchy and administrators:

  1. Chairperson: Shall be a retired Judge of Supreme Court or High Court selected by the govt. after consultation from the Chief Justice of India.
  2. CG Member: shall be a compatible Arbitral practitioner.
  3. Chairperson Member: shall be a compatible academician, holding sufficient learning in the area of Arbitration which will be selected by the govt. and after the consultation of the chairperson.
  4. Ex-officio Members: shall be a secretary of the Govt. department or official bodies.

In India, by the formation of the Arbitration Council through this amendment, considerably in much less period, became much efficient in the working of Arbitration. Concerning the impartiality of the Arbitration Council, here the criticism arises as to the fact that under the formation of the Arbitration Council consists of much interference of the Government of India, which in turn, may lead to the unfair cause of any means.

  1. Appointment of Arbitrator

By amending section 11 and adding section 11(3A) in the Arbitration Act, 2019, renders that the control has been delivered to the Supreme Court and the High court to designate the institutional arbitration rated by the Arbitration Council as mention u/s 43 (I). Regarding the amendment of section 11, it states an appointment/selection of Arbitrators through Courts by an Application from the concerned party. In this way, the Supreme Court (Handling disputes of International Commercial Arbitration) & the High court (Handling disputes of domestic arbitration) granted control to designate the selection of Arbitrators to institutional arbitration rated based on Arbitration Council, and in the matter of absence, to furnish panel of arbitrators. The power of the Courts to designate the appointment of arbitrators is considered to be a positive approach that has been exercised by eminent arbitral countries like Singapore and Hong Kong. Also, the amendment covers the issue concerning the absence of arbitration institutions in the respective jurisdiction, the CJ of the High Court in the same respective jurisdiction has the power to designate the arbitrator from the Panel of the arbitrators.

  • Limitation period:

This amendment provides that after the application enunciated by the concerned party, a limitation period of 30 days has been granted to the court/the Arbitration institution for appointing an Arbitrator.

  • The fee of the arbitrator:

This amendment provides that the control of fixing and managing the affairs relating to the submission of the arbitrators' fees has been given to respective Arbitration institutions/the Panel of the arbitrators. Moreover, the fourth schedule of the amended Act, 2019, provides the fee submission Order to be followed mandatorily.

Criticism

The lawmakers did their best to step up and initiate more for the Arbitration area, yet, concerning the technicalities and Real practical process in consonance to the limitation period, it's typically unrealistic. In a developing country like India, besides a rising number of ample cases, in the Arbitration proceeding, to finish the pleadings within six months is highly impossible. From discovery to inspection, various procedures are meant to be performed, which is practically laborious to clear within the time limit as provided in the section. Concerning the dispute resolution of the Multi-arbitral parties, the timeline provided is impracticable.

For the International Commercial Arbitration, reference to be made under Rule 24[2], according to which, management for conducting arbitral proceedings relating to consultation of parties, delivery of orders, initiation of the arbitral proceeding, and rendering award has been stated. However, this Indian amended Act version of the Period of Limitation barred the ICA from following the limitation period as both lacks the balance of time limit. Also, it is essential to mention, that the elimination of the prescribed time limit in the amended section will surely lead to sway international parties to another country other than choosing our jurisdictional seat of India.

  1. Privacy

The essential addition has been enunciated under this Act of section 42A. This provision provides the notion of confidentially of the proceedings of Arbitration, which is to be followed by:

  • The arbitrator,
  • The disputed parties, and
  • The institution of Arbitration

However, the same will not be applicable in the case of the arbitral award, where it becomes mandatory to disclose the confidentiality of arbitral award reason being for Execution purposes.

Criticism

  • Section 34: As according to this section of the said Amended Act, it provides that an appeal can be raised against the Arbitral Award. In such a condition, confidentiality is at high risk of being ruined.
  • Publication of Awards: According to the ICC Rules updated notice[3], information has been received by the arbitral parties, and the tribunals with the title Publication of awards stated that the Award rendered from 1st day of January, 2019, will be published in no less than two years. It comprises an Opt-out Procedure, according to which the power is granted to the arbitral parties to leave the publication procedure, and the same will be accepted by the authorities. However, concerning the above publication of Award or the Opt-out Procedure, The Indian Amended Act, 2019, failed to mention any clarity for the publication of the Award.
  • Qualification of an Arbitrator

The latest amendment from the Arbitration Act, 2019, enunciated the requirements to be an eligible arbitrator. By inserting Eight Schedule, all the essentials, capacity, eligibility, and competence being mentioned based on which the person shall be assessed and accredited as an arbitrator. The Arbitrator can be from the following areas:

  • Legal Practitioners registered under the Indian Advocates Act, 1961
  • Individual having a law degree and holding the position in a Govt/Auto. Department
  • Public Sector Undertaking
  • Private Sector Undertaking and other professionals. eg: Chartered Accountant
  • Company secretaries
  • Engineers

Furthermore, the Arbitrator must know the law of the land, should be impartial, and holds the value of equity, justice, and good conscience. Apart from this, the Arbitrator should have the ability/skills to deliver an arbitral award, provide rationalization, and familiar with the enforcement of the delivered award.

Criticism

  • Not applicable to international arbitrators: As the requirements are provided under the 8th Schedule, it is to be considered that the Amended Act, 2019, is silent on the issue of whether the International Arbitrators are allowed to be part of the Arbitral Institution of India. It will lead to the disinterest of the international Arbitrators to hold the seat of arbitration in India.
  • Lack of Nationality
  • Partiality
  • Applicability of the Amended Act, 2015- Section 87: Prospective Effect

This amendment includes the addition of a provision Section 87, and at the same time, disregarded/omitted provision Section 26 so that there will be no inconsistencies between the two provisions. By the introduction of section 87, it illuminated the matters on which the Amended Act, 2015 shall be implemented to:

  1. The Arbitrations initiated on or after the date from which the 2015 Amendments came into force, i.e., 23 October 2015; and
  2. The Court proceedings arising from such proceedings of Arbitration.

This amendment eliminated the most significant issue that the Amended Act, 2015 shall not apply to:

  1. The Arbitrations initiated before 23 October 2015;
  2. The Court proceeding arising from such proceedings of Arbitration; and
  3. The Court proceedings initiation after the commencement of the Amended Act, 2015.

By this, the Amended Act, 2015 holds a Prospective effect.

Impact on the Cases

This amendment reflected and invalidated the Case of BCCI in which the Apex Court delivered the decision that the applicability of the Amended Act, 2015 would extend to the Initiation of all court proceedings raised from the arbitral proceeding on, after and before 23rd October 2015.

Automatic stay on the execution of Award

Before the Amended Act, 2015, the arbitration Act provided that during the pendency of the petition against an award lies before the Court of law under section 34, the arbitral Award raised from the domestic Arbitration shall automatically stay. It leads to a severe issue that whether the Amended Act, 2015 apply retrospectively?

Criticism

Nevertheless, in the case of, Hindustan Construction Company Ltd, the Apex court delivered the decision that by applying Article 14, Section 87 of the Arbitration Act, 1996, shall be nullified as the provision is arbitrary. This Court also provided that the issue of applicability of the provision either, retrospective or, prospective has been resolved in the matter of BCCI, yet, the insertion of section 87 in the amended act is unjustified. Also, the Court remarked that the insertion of section 87 will leads to the delay of the Arbitration proceedings.

  1. Delivery of Interim measures

By the Amended Act, 2015, the parties have entitled the right to apply for Interim Measures ordered through the Arbitral Tribunal during, pre, and post-Arbitration. But, the right of the parties to demand Interim Measures from arbitral tribunal post-arbitration; after the deliverance of the Arbitral Award, has been eliminated by the Amended Act, 2019.

Concluding the Statute Analysis of the significant amendments enunciated in the Arbitration Act, 2019, the very notion which has been adopted by the legislature behind this enactment is to improve, encourage, and support arbitration area without any complexities and intricacies. However, there are various criticism as above-mentioned by the author essentially meant to show that even if the amended act, 2019, raised with much work on insertions and alterations, still, it lacks compatibility as compared to foreign arbitration laws. Being a recently amended act, now it is to be seen how the Court will deal with these complications and the settlement of disputes by the Arbitral Institutions.

Views are personal.

[1] Section 2(ca) of The Arbitration and Conciliation (Amendment) Act, 2019

[2] International Chamber of Commerce Arbitration Rules, 2017

[3] Para 40-46 of "Publication of Awards delivered by The International Chamber of Commerce


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