Enforcement of arbitral awards passed on the basis of arbitration agreement induced or effected by fraud/corruption can now be “unconditionally stayed”, pending disposal of the challenge made to the award under Section 34 of the Arbitration & Conciliation Act 1996.

This has been reflected in the new ordinance promulgated by the President Ram Nath Kovind on Wednesday.

The ordinance has also deleted Eighth Schedule of the Arbitration & Conciliation Act 1996, paving the way for foreign practitioners to now act as arbitrators in India-seated arbitrations, say legal experts. The Schedule deals with qualifications and experience of arbitrators.

Enforcement of arbitral awards

It may be recalled that Section 36 of the Arbitration & Conciliation Act was amended in 2015 to the effect that mere filing of 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, said Sushmita Gandhi, Partner, IndusLaw. 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 judgments passed by the Supreme Court on arbitrability of fraud”, she said.

However, this amendment has the potential of opening floodgates of seeking unconditional stay of awards, which would delay the enforcement of award, according to Gandhi. It shall be interesting to see how the courts will apply this amen dment, she added.

Eighth Schedule

Shaneen Parikh, Partner at law firm Cyril Amarchand Mangaldas, said, the Ordinance is a welcome step for India’s arbitration regime.

“The deletion of the Eighth Schedule confirms that foreign practitioners can now act as arbitrators in India-seated arbitrations – something that was criticised by the global legal community for prescribing a narrow and exhaustive (rather than inclusive) list of qualifications for arbitrators, which compromised party autonomy and fell at odds with the goal of putting India on the global arbitration map. The deletion of the Eighth Schedule by the 2020 Ordinance reinforces that the government is receptive to, and willing to act on, stakeholder feedback to ensure that India maintains s pro-arbitration outlook”, Parikh said.

Aseem Chawla, Managing Partner, ASC Legal, said: "One of the chief highlights of the ordinance is to curb instances where arbitration awards were induced by an act of fraud/corrupt activities; in such a situation the Court has been now empowered to unconditionally stay the award. Similarly arbitration agreements which form basis of award precipitated by such unlawful means could be stayed upon a prima face satisfaction by the Court."

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