Arbitration and Conciliation Act, 1996 with special reference to 2015 Amendment

Arbitration is one of the modes of Alternative Dispute ResolutionMechanism in India. The need for this alternative mechanism was felt due to the shortcomings of the litigation system in India including over pendency of cases, the rigid procedural requirements and the time and cost consuming process in which disputes were dealt. The liberalization of economy in 1991 under PM P.V. Narsimha Rao and FM Manmohan Singh created the need to facilitate quick enforcement of contracts, easy recovery of monetary claims, reduce the pendency of cases in courts and hasten the process of dispute resolution through arbitration, so as to encourage foreign investment by projecting India as an investor friendly country having a sound legal framework and ease doing business in India.

Prior to this, the law on arbitration was dealt by three legislations, namely, the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961, however, these laws were unable to fulfil the contemporary requirements and hence the new legislation was enacted. The United Nations Commission on International Trade Law(UNCITRAL) adopted the UNCITRAL Model Law in 1985 and the General Assembly recommended that the member nation states give due consideration to the same and the rules herein provided were to be used in international commercial agreements for dispute resolution through conciliation.
These were incorporated in the Arbitration and Conciliation Act, 1996 which was enacted with the objective to comprehensively cover all international, domestic and commercial arbitration and conciliation in a mechanism which is fair, efficient and capable of meeting the needs of the specific arbitration. It was aimed to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal.
The current Government promulgated the Arbitration and Conciliation (Amendment) Ordinance, 2015 to amend certain provisions of the Arbitration and Conciliation Act 1996 which received assent from the President on 23rd October, 2015. The Arbitration and Conciliation (Amendment) Bill, 2015 (Amendment Bill) was introduced in both houses of Parliament in its recent session to replace the Arbitration and Conciliation (Amendment) Ordinance, 2015 and was subsequently passed by the Lok Sabha and Rajya Sabha on 17th December, 2015 and on 23rdDecember, 2015 respectively. This Amendment Bill has now become an Act after having received the President’s assent on 31.12.2015 and has come into force on the 23rd October, 2015.
The 2015 Amendment Act brought about a series of amendments in the 1996 Act-

  • Sections 2, 7, 8, 9, 11, 12, 14, 23, 24, 25, 28, 31, 34, 36, 37, 47, 56, 57 were amended.
  • Section 11-A, 29-A, 29-B, 31-A, as well as new Fourth Schedule, Fifth Schedule, Sixth Schedule And Seventh Schedule were inserted.
  • New Sections for section 17 and 36 were inserted.

The Amendment was broad in scope and overhauled various aspects of the Act. The amendments to existing sections mostly dealt with expansion of scope to include foreign courts, arbitral awards, including electronic means as a valid source of communication, time limit for start of arbitration proceedings if interim order has been passed, permission of counterclaim and set off to be submitted by the respondent, and so on.
The inserted new Sections are of special consequence in the new Amendment Act as The insertions of new Section 11-A, 17, 29-A, 29-B, 31-A, 36 are discussed below:

Section 11-A: The Central Government has been empowered to amend the fourth schedule with the passing of the same by both houses of the Parliament. This fixes the model arbitration fee according to the sum of settlement. Also if a sole arbitrator is handling the same he is entitled to an additional fee of twenty five percent.
Section 17: The arbitral tribunal shall have power to grant all kinds of interim measures which the Court is empowered to grant under section 9 of the Act. Such interim measures can be granted by the arbitral tribunal during the arbitral proceedings or at any time after making the arbitral award, but before it is enforced under section 36 of the Act. Any order issued by the arbitral tribunal for grant of interim measures shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 in the same manner as if it were an order of the Court.
Section 29A: The Tribunal shall ensure speedy completion of Arbitration proceedings and pass the award within a period of twelve months from the date when the arbitral tribunal enters upon the reference. However, the parties may extend such period for a further period not exceeding six months. If the award is made within a period of six months, the arbitral tribunal shall be entitled to receive additional fees as the parties agree. If the award is not made within specified period or extended period, the mandate of the arbitrator shall terminate unless the time is extended by the court.
Section 29B: This Section provides for a fast track procedure for conducting arbitral proceedings, in cases where the parties mutually agree for such procedure. In such cases, the arbitral tribunal consisting of a sole arbitrator shall decide the dispute on the basis of written pleadings, documents and written submission and shall not hold an oral hearing. The award is to be made within a period of six months from the date the arbitral tribunal enters upon the reference.

Section 31-A: This Section provides that Court/Arbitral tribunal is empowered to decide upon the regime of costs, even stating that the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party and if the court decides to diverge then stating the reasons in writing for the same. This section also maintains that the conduct of all the parties, whether a party has succeeded partly in the case, whether the party had made a frivolous counterclaim leading to delay in the disposal of the arbitral proceedings; and whether any reasonable offer to settle the dispute is made by a party and refused by the other party are all going to be determinants in deciding upon the costs.

Section 36: Mere filing of an application for setting aside an arbitral award would not render that award unenforceable unless the court grants an order of stay on the operation of the said award on a separate application made for that purpose.

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L&P Editorial Team

The Law & Practice Blog's editorial team.

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