Arbitration Bill gets Lok Sabha nod

The Lok Sabha on Friday passed the Arbitration and Conciliation (amendment) Bill 2021 to replace an ordinance that enabled certain arbitral awards to be “unconditionally stayed”.

This ordinance — promulgated in November last year — provided that enforcement of arbitral awards passed on the basis of arbitration agreement induced or effected by fraud/ corruption can now be “unconditionally stayed”.

This would be allowed pending disposal of the challenge made in the award under Section 34 of the Arbitration & Conciliation Act 1996. The ordinance had also deleted the Eighth Schedule of the Arbitration & Conciliation Act, 1996, paving the way for foreign practitioners to act as arbitrators in India-seated arbitrations. This schedule dealt with the qualifications and experience of arbitrators.

Replying to discussions on the Bill in the lower house, Union Minister of Law and Justice, Electronics and Information Technology and Communications, Ravi Shankar Prasad, said India would like to become a good hub of arbitration and the government would give complete autonomy to the Arbitration Council of India and the new arbitration centre being set up in New Delhi.

“India will become a good hub of arbitrationonly when the world trusts the integrity of the systems here — governance and award delivery. That is what this Bill supports”, he said.

He highlighted that the ordinance had to be promulgated due to compelling reasons and to ensure that taxpayer monies were not bartered.

On infrastructure projects, the Minister said the government has given directions for fast tracking payments. At the same time, the Minister cautioned that India should not become a centre for procuring awards based on corrupt and fraud means.

Enforcement of arbitral awards

Section 36 of the Arbitration & Conciliation Act was amended in 2015 to the effect that the mere filing of a Section 34 application does not stay the enforcement of the award, and it can be stayed on an application and subject to conditions imposed by the court.

However, the latest amendment is a slight departure from the 2015 amendment. It has the effect of unconditionally staying the enforcement of the award passed on the basis of the arbitration agreement, induced by fraud or corruption.

The driving force behind the amendment is that the parties must get an opportunity to seek unconditional stay of the award, where there are allegations of fraud or corruption. The amendment is, in fact, in line with the judgements passed by the Supreme Court on arbitrability of fraud.