The Arbitration and Conciliation (Amendment) Act, 2015, brought a sea of change to India's arbitration landscape. This amendment aimed at making arbitration in India as comparable to global standards as possible and eliminating some of the major inefficiencies in the arbitration process, making it more time-effective, fair, and economical.
Arbitration is the alternate dispute resolution mechanism in most of the world's commercial affairs. India already had an Arbitration and Conciliation Act, 1996, but it did not provide the much-needed efficiency and modern approach that was delivered according to international standards. It resulted in undue delay, high costs, and judicial intervention at almost every step of arbitration. The amendments in the year 2015 aimed to relieve these drawbacks by proposing specific provisions focused on reducing delay, fairness, and enforcement of arbitral awards.
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Detailed Analysis of the 2015 Amendments of the Arbitration and Conciliation Act
The Arbitration and Conciliation (Amendment) Act, 2015 was brought with the aim to revamp India's arbitration framework to overcome delays and provide more efficient mechanisms. All the amendments that it brings are given as follows:
1. Definition of 'Court'
The amendment defines "Court" as distinguished under international commercial arbitration and domestic arbitration.
Under domestic arbitration, "Court" retains the meanings and definitions as found under the 1996 Act.
For international commercial arbitration, the High Court of competent jurisdiction alone would qualify as a court depriving the district court's jurisdiction for such cases.
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2. Amendment to Section 2(2)
The proviso to Section 2(2) clarifies that subject to any agreement to the contrary, Sections 9 (interim measures), Section 27 (taking evidence), and Section 37 (appeals) apply even if the seat is outside India to international commercial arbitrations.
This amendment provides a balance to the verdicts delivered in Bhatia International and Balco v. Kaiser by making these provisions applicable unless the parties specify otherwise.
3. Amendment to Section 8 (Reference to Arbitration)
The court must refer disputes for arbitration if there is a valid arbitration agreement present, even though earlier judgments of the courts may so suggest.
If an arbitration applicant cannot provide a copy of the agreement, he may apply for an order to force the other party to do so.
4. Amendment to Section 9 (Interim Measures)
In case the interim measure is granted by a court, arbitral proceedings must be commenced within 90 days or an extended period as per the order of the court.
The courts would entertain applications under Section 9 only where remedies available under Section 17 (tribunal's interim measures) would be found wanting to send parties to arbitration as the mode of redress well-liked.
5. Amendment to Section 11 (Appointment of Arbitrators)
The courts shall make appointments of arbitrators within 60 days from the date of receipt of notice in an endeavor not to delay the proceedings much.
The nomenclature "Chief Justice of India" and "Chief Justice of High Court" is substituted by the Supreme Court or High Court respectively
High Courts can limit the fees that arbitrators may charge at Fourth Schedule rates, thus vesting them with the powers of cost-controlling arbitration
6. Amendment to Section 12 (Declaration of Independence and Impartiality)
Arbitrators shall disclose any such relationships or interests that may affect their impartiality.
There is a fifth schedule that lists down certain disqualification grounds whereby the transparency is increased.
Schedule VII states the circumstances disqualifying an arbitrator that both parties must waive prior to setting their dispute for arbitration resolution.
7. Amendment to Section 14 (Termination of Arbitrator's Mandate)
The amendment outlines circumstances in which an arbitrator's mandate is terminated and they are replaced when an arbitrator is found to not be performing their functions as required.
8. Amendment to Section 17 (Preliminary orders by arbitral tribunal)
The tribunals are given the power to make preliminary orders with the force and effect of any orders made by a court.
Courts should generally refrain from intervention once an arbitral tribunal is established unless exceptional circumstances so require.
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9. Amendment to Section 23 (Counterclaims)
Respondents may raise counterclaims or set-offs well within the scope of the arbitration agreement, which would allow greater redressal in one arbitration proceeding.
10. Amendment of Section 24 (Hearings and Adjournments)
Arbitral tribunals should conduct their sittings on a day-to-day basis and may even provide penalties for adjournments without sufficient cause to hasten the process.
11. Insertion of Sections 29A and 29B (Time Limit for Award and Fast-Track Procedure)
Section 29A categorically requires the tribunals to pass an award within a period of 12 months from the date of reference, which shall be extended further for a period of 6 months with the consent of the parties. Courts may extend the said period in exceptional circumstances, but the arbitrator's fees can be reduced for delays on the part of the arbitrator.
Section 29B establishes accelerated arbitration, which shall be finished within the duration of six months by simple writing unless oral proceedings are chosen.
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12. Amendment to Section 25 (Respondent’s Defence)
If a party to the arbitral proceedings, that is, the defendant, does not present his defence paper, the arbitral tribunal is vested with the authority to continue the arbitral process without considering such failure as an admission of the claims made by the claimant.
13. Amendment to Section 28 (Examination of Terms and Trade Usages)
Tribunals should consider the terms of the contract and trade usages to decide while offering scope for discretionary judgment if decisions without strictly resting on the terms of the contract.
14. Amendment to Section 31 (Interest and Costs)
The tribunal may impose future interest at 2% above the prevailing rate if no specific rate is determined.
Costs can be assigned per the new guidelines, ensuring equitable sharing of arbitration expenses post-dispute rather than predetermined in contracts.
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15. Amendment to Section 34 (Public Policy Grounds for Award Challenge)
International arbitration judgments can only be challenged on the grounds of being violative of public policy where they would touch upon fraud, violate basic Indian law, or go against basic morality.
The "patent illegality" ground is available for invocation only against awards made within India and cannot be used against international awards.
16. Amendment to Section 36 (Stay on Enforcement of Award)
The mere step of applying Section 34 to set aside the award will not automatically stay itself. The automatic suspension imposed by prior decisions no longer applies with a specific order for a stay now.
17. Amendment to Section 37 (Appeals)
Parties can appeal judgment refusing to refer cases to arbitration under Section 8.
For foreign awards, clarifications have been introduced as to whether the grounds of enforcement refusal include an award contrary to Indian public policy, as indicated by Sections 48 and 57.
Impact of the 2015 Amendment on Arbitration in India
The 2015 amendment to the Arbitration and Conciliation Act has seen a significant consequence on arbitration in India:
Promotion of India as an Arbitration Hub: India is now more in favor of the conduct of international arbitration as arbitration has been modernized within the country.
Reduced delays and cost-efficiency: Today, arbitration in India is faster and more cost-effective in terms of time and monies usually paid for in litigation.
Empowerment of Arbitral Tribunals: It has empowered the arbitral tribunals to make interim orders enforceable and thereby assert their position with lesser dependence on courts.
Improved Neutrality and Fairness: The trend of increased requirements of neutrality along with disclosure obligations of the arbitrators has created an increased level of trust in the process of arbitration, which has further resulted in enhanced confidence among the parties.
Encouraging Alternative Dispute Resolution: The Act promotes alternative modes of dispute resolution as it removes judicial interventionism to the smallest extent, making arbitration a self-contained mode of resolution, which leads to more parties opting for arbitration rather than court-based litigation.
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Conclusion
The 2015 amendment to the Arbitration and Conciliation Act brings a sense of modernity to India's arbitration regime making it faster, cheaper, and even more in line with international standards. It provides the much-needed gateway toward realizing the dream of an arbitration-friendly India that businesses and their clients can see. Changes indicate a strong commitment from India toward making fewer litigations, decreasing judicial intervention, and positioning itself as an arbitration-friendly jurisdiction.
Arbitration Act 2015 Amendment FAQs
Q1. What is the purpose of the 2015 amendment to the Arbitration and Conciliation Act?
The main intention is that arbitration in India must be swift, cost-effective, and less litigation. The modifications will eradicate delay, allow arbitrators to not be under the influence, and make the arbitration process in India similar to the international exemplar.
Q2. How has the 'Court' definition altered due to this amendment?
Domestic and international commercial arbitration are differentiated. In the case of domestic arbitration, the meaning remains the same, whereas, regarding international arbitration, it would be only the jurisdiction of the High Court. So, the district court does not have any jurisdiction in that matter.
Q3. Under the amendment, what is the new period for an arbitration award?
An arbitral award must be made within 12 months from the commencement of arbitration. An extension of a further 6 months may, however, be granted at the request of either party by both parties where both parties agree. Any further extension on that may entail court orders and penalties for delay.
Q4. What is fast-track arbitration, and when can it be used?
Fast-track arbitration is a fast-tracked procedure in which the case gets decided within 6 months, mainly on the basis of written submissions without oral hearings, unless required by the parties. The parties can opt for it at any stage of the proceedings if they feel they need a quicker resolution.
Q5. Can parties challenge the award on the grounds of 'public policy'?
Yes, but the amendment restricts the scope. The award could now be set aside for reasons of public policy only if it relates to fraud or violates basic Indian law or morality. For domestic awards, "patent illegality" would also be a valid challenge.
