Making India a global hub for arbitration

Abhinav Kumar | Updated on March 24, 2021

Justice mechanism The new Act is a culmination of India’s journey in the field of global arbitration   -  /iStockphoto

The notification of new Act will pave the way for an efficient mechanism for international commercial arbtitration

On March 11, 2021, the Arbitration and Conciliation (Amendment) Act , 2021 was notified in the Gazette of India after receiving the assent of the President. This Act also repealed the Arbitration and Conciliation (Amendment) Ordinance, 2020 and it is considered as the landmark step towards making India as the hub of International Commercial Arbitration.

Indian Judiciary and Arbitration

Foreign entities have always criticised the Indian judiciary for the extra-territorial application of domestic laws in foreign seated arbitrations. However, the recent jurisprudential developments in the arbitration laws in India through various court decisions have restored the faith in Indian judiciary vis-à-vis best international practices.

In the case of Sundaram Finance Ltd v Abdul Samad and Another (Civil Appeal No 1650 of 2018, 15 February 2018) the Supreme Court held that “an award holder can now initiate execution proceedings before any court in India where assets are located”.

Similar concurring opinion were also laid down earlier by Delhi High Court in Daelim Industrial Co Ltd v Numaligarh Refinery Ltd [2009] 159 DLT 579) and Karnataka High Court in Sri Chandrashekhar v Tata Motor finance Ltd & Ors. [2015] 1 AIR Kant R 261.

The earlier Act

The Arbitration and Conciliation Act, 1996 was enacted with a purpose of providing cost effective and time efficient mechanism for the dispute resolution. This Act had aimed to consolidate and amend the law relating to domestic arbitration and enforcement of foreign arbitral awards.

Developments after 2014

One of the pioneering initiatives of the Modi government was making India the hub of International commercial Arbitration and the setting up of an independent and autonomous regime for institutionalised domestic and international arbitration can be clearly seen.

Arbitration and Conciliation (Amendment) Act, 2015 came into effect, from October 23, 2015 and it will apply (i) to arbitral proceedings (ii) to court proceedings. However, the amendment to Section 36 of the Act, which pertains to removing the implied automatic stay on the execution of arbitral awards, applies retrospectively as it is procedural in nature. The 2015 Amendment Act is a notable breakthrough towards improving the efficiency of arbitration in India.

In 2017, the High-Level Committee (HLC), headed by Justice BN Srikrishna, former Judge of the Supreme Court of India, was constituted. The Committee recommended that the Union government may take over the International Centre for Alternative Dispute Resolution (ICADR).

In 2019, amendments to the Arbitration and Conciliation Act, 1996 (‘Act’) came into being. One of the key highlights of the Amendment of 2019 was introduction of Part 1A and the concept of an Arbitration Council of India. It was established through notification by the government, and had its headquarters in Delhi. From Section- 43 A to 43 J categorically deals with the Arbitration council of India. Schedule Eight (Section 43) was added “Qualification and Experience of Arbitrators”.

The new Act

In its latest move, the Centre has come up with the Arbitration and Conciliation (Amendment) Act, 2021 and the Bill was passed in the ongoing Budget session of Parliament and notified on March 11. It replaces an Ordinance and came into force from November 4, 2020.

According to the Act, amendment of Section 36 shall be deemed to have been inserted with effect from the 23rd day of October, 2015. It remarks that “Provided further that where the Court is satisfied that a prima facie case is made out that, (a) the arbitration agreement or contract which is the basis of the award; or (b) the making of the award was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award”.

Further this Act, provides for the Norms for accreditation of arbitrators under section 43 (J) and then it notifies the Omission of Eighth Schedule.

However, a few parliamentarians opposed this Bill in Lok Sabha, quoting that “it is a needless amendment as Section 34(2)(b) of the existing Act covers agreements induced by fraud/ corruption”.

Some predicted that retrospective application of the amendment may invite a slew of litigation by making false allegations of corruption and fraud, thereby defeating the very purpose of alternative dispute redressal mechanism.

The government, on the contrary, claimed that the amendment to Section 36 of the Act, despite use of words fraud/corruption in Section 34, was necessary as the latter does not provide for an “automatic stay” of the award.

According to the statement of objects of the Bill, as it was introduced in Parliament, “In order to address the issue of corrupt practices in securing contracts or arbitral awards, a need was felt to ensure that all the stakeholder parties get an opportunity to seek unconditional stay of enforcement of arbitral awards, where the underlying arbitration agreement or contract or making of the arbitral award is induced by fraud or corruption.

Also, to promote India as a hub of international commercial arbitration by attracting eminent arbitrators to the country, it was also felt necessary to omit the Eighth Schedule of the Act.”

Therefore, the Centre through its various programmes is trying hard to promote initiatives like Ease of Doing Business and Make in India by ensuring maximum governance and minimum government.

Post 2014 developments in the Arbitration and Conciliation Act, 1996 sets the remarkable odyssey of India to create the vibrant cost effective and time-efficient mechanism for international commercial arbitration.

The writer is a Law and Policy expert and teaches at University of Delhi. Views expressed are personal

Published on March 24, 2021

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