Analytical Study of Arbitration and Conciliation (Amendment) Act, 2019 in Light of Contemporary Issues & Its Legal Implications
Authors: – Naveen Patel and Praful Jain, Student,
3rd Year, B.A.LL.B
Five Year Law College, University of Rajasthan, Jaipur
Arbitration is a medium to settle disputes between the parties where a third neutral person (Arbitrator) without resorting to the Court to settle the dispute. Arbitration gets its legal identity and validity through Arbitration and Conciliation Act, 1996. This paper discusses the Role of Arbitration in India as a mechanism to settle the dispute. In this, it mainly discusses the key objective for the Arbitration and Conciliation Act, 1996 bring into force. It focuses to diminish the burden of the judiciary by having separate proceedings other than the court proceedings and without the interference of court the disputes are settled.
The paper emphasizes the latest amendments of the Arbitration and Conciliation (Amendment) Act, 2019 which were brought up by the legislation to fill up the loopholes in the principal Act and to decide the application of Arbitration (Amendment) Act of 2015. The amendment mainly focussed on contemporary issues for instance- appointment of an arbitrator, limitation of time for arbitral proceeding but the Act is silent about the time limit for the International commercial arbitration. This amendment also provides the privacy of arbitration proceedings but it is silent about exempted subject matters.
The paper further discusses on judgment on the main controversial issue of applicability of Amendment Act, 2015 in regarding arbitration and court proceedings. It states the implications of the new Amendment Act, 2019 in which it briefly states that the council established under this Act may have government influence in its Constitution may have.
Keywords: – Arbitration, Conciliation, Amendments, Sluggishness, Confidentiality.
Arbitration is a mechanism to resolve the dispute outside the court between parties by an appointment of a neutral person called Arbitrator. According to Section 2(1) (a) of the Indian Arbitration and Conciliation Act, 1996 “Arbitration means whether or not administered by permanent arbitral institution”.
The Landmark case of Collins v. Collins defines Arbitration “arbitration is a reference to the decision of one or more persons, either with or without empire of a particular matter in difference between the parties”.
Arbitration is a form of Alternate Dispute Resolution (ADR) and it helps in to settle down the risen dispute by way of a contract between the parties to the dispute. This method of setting down the dispute mainly concerned about commercial disputes. The nature of arbitration can be both voluntarily as well as mandatory, the voluntary arbitration means that when two contracting parties decide to appoint an Arbitrator on the provision of a contract between them either the dispute will arise or the dispute which has been already raised. Mandatory arbitration means that it is preceded whether the dispute raised or will arise in the future then it would be settled only by way of Arbitration. The decision given by the arbitrator is called award and can also be subject to appeal in a court
of law if a contract contains the clause of unsatisfactory award.
Arbitration regime in India: as a mechanism
In India, Arbitration as a mechanism to resolve the disputes between the parties without any interference of any courts with an aim to minimizing the supervisory role of the court which is cost-effective as compared to the court proceeding and it is also a less time-consuming process. The Arbitration law comes intending to diminish the court pendency and delay justice. The Arbitration and Conciliation Act, 1996 there is a provision related to Arbitrator in India to conduct Arbitration proceedings and to make it clear to the parties to resolve the disputes fairly and reasonably. After this court should get rid of the proceedings and should work efficiently and then the arbitration clause was satisfied by some arbitral award which was the favour to the parties and it shows the clear main aim of the Act.
In India, The Arbitration and Conciliation Act, 1996 gives basic feature which provides statutory provision where an arbitrator is appointed for the stoppage of pendency of case filed in the court and ensures speedy justice which provides expeditiously. So, after such interpretation of this law, the following are the objectives of the Arbitration and Conciliation Act, 1996 to fulfil according to the societal needs: –
- It widely deals with the Domestic arbitration and conciliation and International commercial arbitration and conciliation.
- There is a provision where it provides a fair and neutral settlement.
- To minimize the role of court (to minimize the supervisory role of court).
- To permit the Arbitral tribunal to use conciliation during Arbitral proceedings.
- Every decision by the Arbitral Tribunal which is the final decision in the Arbitration and Conciliation Act, 1996.
- Their objective ensuring making an award was settled in terms of parties.
- To provide every final award is enforced in the same manner as if it were a decree of court.
- To provide a condition and procedure to enforce foreign award surrender (under) New York Convention and Geneva Convention.
- To make provision for an effective and efficient procedure to meet the requirement and need for specific arbitration.
The Supreme Court of India in its decision in Food Corporation of India V. Indian Council of Arbitration has pointed out that the legislative intent of the Arbitration Act, 1996 is to minimize the supervisory role of the court in arbitral process and expeditious appointment of Arbitrator so that all the contentious issues may be decided by the process of the arbitration without recourse to litigation.
The Arbitration and Conciliation (Amendment Act 2019)
The Arbitration and Conciliation (Amendment) Act, 2019 targets to provide the arbitration amicably by removing the vagueness arising from previous amendments in the law and by enhancing the Indian arbitration regime.
India has always strived to lead in the field of Arbitration and to emerge as a significant option for the contracting parties in the field of arbitration. The Indian Arbitration system and conciliation Amendment Act 2015 enacted to enhance the progress and to strengthen the Indian Arbitration system. Afterwards, the committee was headed by Justice B.N Srikrishna which had the objective to develop and promote Institutional Arbitration in India.
Later, the legislation on the recommendation of a committee that was set up for the development and promotion of Institutional Arbitration in India decides to alter the arbitration and conciliation Act by enacting Arbitration
and conciliation (Amendment) Act 2019. This Act was brought up to provide an effective and efficient arbitration system for the resolution of the commercial dispute.
The Arbitration and Conciliation (Amendment) Act -2019, comes with certain changes to make reforms in the arbitration system of India and to resolve contemporary issues prevailing in the Arbitration and Conciliation Act 1996 and Arbitration (Amendment) Act 2015.
Legislative enactments on contemporary issues: –
The legislative enactments herein attempt to eliminate the ambiguities which stood up in the earlier Acts; the following contemporary issues were taken into consideration while enacting the Arbitration and Conciliation (Amendment) Act, 2019:
- Need for separate institutions for regulating arbitration mechanism for smooth functioning and lessen the burden on the judiciary regarding the appointment of arbitrator.
- No specification of the period of the proceedings, the time is taken for the proceeding was sometimes prolonged due to which a lesser number of proceedings could take place within a day.
- No confidentiality of arbitration proceedings, the right to privacy is a very concurrent issue and there could be a breach of privacy of the parties, by the parties to proceedings, arbitral institution and the arbitrator itself.
- Determination of the effect of the arbitration amendment act, 2015 whether it is retrospective or not, further the act mentioned it to be prospective in nature and not retrospective.
- (1)The Arbitration Council of India
This Arbitration Council of India constituted under Part IA (Section 43A to 43M) of Arbitration and Conciliation (Amendment) Act 2019.
I)Object: – This independent body established under (Amendment) Act 2019 is to promote the alternate dispute resolution mechanisms i.e. arbitration, conciliation and mediation and other forms of alternative dispute resolution mechanisms. This council will play the role of the nodal institution and work independently for regulatory reforms in Arbitration, to encourage uniform level and strengthen institutional arbitration.
II)Responsibility : – This independent council formed with an obligation to maintain uniform standards in cases of arbitration as well as for grading arbitral institutions on the grounds such as calibre and quality performance of arbitrators and also on basis of completion of arbitral proceedings within specified time.
III)Composition [Section-43C (1)]: – The council will be the composition of following members under Section 43C of Arbitration and Conciliation (Amendment) Act,2019.
a) The Chairperson of the council will be either:
- Judge of Supreme Court
- Chief Justice of High Court, or;
- An eminent person having knowledge and experience in the field of Arbitration
Note: – Appointed by the Central government in consultation with Chief Justice of India.
b) An eminent arbitration practitioner having knowledge and experience in domestic and international institutional arbitration, nominated by the Central government will be a member of the council.
c)An eminent academician having experience in teaching and research in the field of arbitration and alternative dispute resolution laws, appointed by the central government in consultation with chairperson- Member
d)Secretary to the Government of India in the department of legal affairs, ministry of law and justice or his representatives not below the rank of joint secretary- ex-officio member
e)Secretary to the Government of India and the department of expenditure, ministry of finance or his representative not below the rank of joint secretary- ex-officio member
f) One representative of a recognized body of Commerce and Industry chosen on a rotational basis by the Central Government- part-time member
g)Chief executive officer member-secretary, ex- officio.
(2)Qualification of Arbitration
Arbitrator for resolving the disputes between the parties should be qualified under a New Eighth Schedule of the Arbitration and Conciliation (Amendment) Act 2019.
In the Arbitration and Conciliation (Amendment) Act 2019 a new eighth schedule has been introduced to furnish for the qualification experience and standard for accreditation of Arbitrators. In Indian Advocates Act,1961 there is provided regarding that Advocates have to be enrolled under this Act and person who is qualified advocate or eminent personality in legal field and who have been an officers under the Government organization, Public Sector Undertakings, private sector and another technical sector like Chartered Accountant, company secretaries and engineers which have prerequisite experience can be appointed under this Act.
Further, this Amendment Act 2019 provides general norms under the eight schedules in which the arbitrator should be impartial, fair and required knowledge pertinent laws and principles of just fair and good conscience i.e., natural justice and it requires arbitrator being capable of delivering enforceable arbitral award.
The requirement laid down in the Arbitration and Conciliation (Amendment 2019, explicitly prescribe the normative standard usually used by the parties when nominating the Arbitrator and thus ensure a basic quality test for arbitrator engaged in arbitration in India. If an arbitrator is disqualified or arbitral award set aside on the ground that court remains to be seen to interpret the subjective qualification of impartially, fairness, legal knowledge and capability to write awards.
3 )Logbook for Arbitration Completing within a Time
The Arbitration and Conciliation Amendment Act, 2019 has been altered to resolve the disputes between parties. The section 23(4) on Arbitration and conciliation (Amendment) Act 2019 states that the statement of defences and claims by the parties should be submitted within a period of 6 months from the date when arbitrator or arbitrators received notice in writing of their appointment under the section.
Section 29A(1) of Arbitration and Conciliation Amendment Act,2019 expresses that the dispute other than international commercial dispute, the arbitrator shall made award within the period of 12 months from the date of completion of pleadings under section 23(4) of Arbitration and conciliation (amendment) Act, 2019, The Arbitration and Conciliation (Amendment) Act 2019 gives a privilege to the parties, by mutual consent to extend the period 6 months of Arbitration proceedings and any proceedings do not get completed within period of 18 months then it requires court permission to be continued. The international commercial arbitration is exempted from the timeline given for the completion of arbitral proceedings. The aim of this amendment is to fix problem lengthy arbitration proceeding but still; this Amendment Act of 2019 provides a period of six months more on the consent of parties which creates more difficulties instead of solving it early.
4)Appointment of Arbitrator
Arbitration and Conciliation Amendment Act, 2019 altered section 11 of the Arbitration Act, 1996 which discusses the appointment of an arbitrator. Now in this amendment, it provides that the arbitrator can be appointed through a court or an application by the party. Under section 11(3A) inserted by the new amendment, Act confers power on Supreme Court and the High Court to designate arbitral institutions from time to time which have been graded by Arbitration Council of India under section 43I of this Act, i.e., the appointment of arbitrators.
Exception: – In respect of jurisdiction of concerned High Court, when there is no graded arbitral institution then the Chief Justice of concerned High Court may continue to appoint a body of arbitrators to exercise the function and duties of Arbitral institution and arbitrator appoint under such panel will be entitled to fees which are specified under the fourth schedule of Arbitration and Conciliation Amendment Act, 2019. The panel made by the Chief Justice of concerned High Court is subject to review by Chief Justice of that High Court.
The arbitral institution has an obligation upon it to dispose of an application within the 30 days from the date of notice served on the opposite party.
Section 42A was inserted by the Arbitration and Conciliation (Amendment) Act, 2019 to provide confidentiality of the information regarding the Arbitration proceedings. This confidentially is to be maintained by the parties, arbitral institutions, and the arbitrator.
Subject to the contrary, the information of arbitral award can be disclosed in a case where enforcement and implementation of an arbitral award are required or necessary to disclose.
6)Application of Arbitration Amendment Act, 2015
The Arbitration (Amendment) Act, 2019 enacted with a major change that changes the course of application of the Arbitration Amendment Act, 2015 in regards to arbitration proceedings and court proceedings. Section 87 inserted by the Arbitration (Amendment) Act, 2019 which restricts the application of Arbitration amendment Act, 2015, which provides that the Arbitration Amendment Act, 2015 will apply to the arbitration proceedings commenced on or after 23rd October 2015, but not before the 23rd October 2015.
Further, the above section 87 of Arbitration amendment Act, 2019 restricted the retrospective effect on court proceeding concerning arbitration that this will apply to a court proceeding in connection to arbitration on or after 23rd October 2015 but not on the court proceedings before 23rd October 2015.
Legal and Practical Implications of Arbitration
- It is controversial to say that the implication of the Arbitration and Conciliation (Amendment) Act, 2019 is negative or positive. The Arbitration and Conciliation (Amendment) Act, 2019 provides Arbitration Council which provides certification to arbitral institutions, accreditation, and grading to arbitrators, the charter of the Arbitration Council of India is under the dominance of government, this may put at risk regarding independency of arbitration in India. It is difficult for the Arbitration Council body to avoid government sluggishness and to be consist of authentic specialists in the arbitration field.
- A Division Bench of the Supreme Court on March 15, 2018, held in the case of Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. that the nature of the Arbitration and Conciliation (Amendment) Act, 2015 (the ‘Amendment Act’) is prospective in its operation and held that it shall apply to both arbitral proceedings initiated on or after the commencement of the Amendment Act and even to court proceedings concerning arbitral proceedings initiated on or after the Amendment Act has come into force.
This ruling was reversed by Arbitration and Conciliation (Amendment) Act, 2019 and restricted the retrospective application of Arbitration (Amendment) Act,2015 which now doesn’t apply on arbitral proceedings and court proceedings of arbitration before the date of 2
3rd Oct. 2015 i.e., date enactment of Arbitration and Conciliation (Amendment) Act, 2015, this resistance of retrospective application of Arbitration and Conciliation (Amendment) Act, 2015 will result into not only affecting the ruling of Supreme Court but it will also create disorder or confusion regarding proceedings of arbitration over nation.
- The Committee Report had also suggested certain positive amendments to Arbitration and Conciliation (Amendment) Act, 2015 which have not been implemented in Arbitration and Conciliation (Amendment) Act 2019. For instance, the Committee Report had suggested including express provisions for the recognition of emergency arbitration and emergency awards.
- Further, the Amendment Act of 2019 did not provide sufficient exceptions regarding the confidentiality of arbitration proceedings.
- Due to a lack of consistency in the Eighth Schedule of the Arbitration and Conciliation (Amendment) Act 2019, it could be interpreted as that a foreign legal person cannot be an arbitrator.
- The Arbitration and Conciliation (Amendment) Act 2019 didn’t specify that which disputes it will apply. The court should decide the applicability of the Arbitration and Conciliation (Amendment) Act, 2019.
The Arbitration and Conciliation Act, 1996 contains some provision which has certain deficiencies later which raised in form of contemporary issues for instance appointment of arbitrator, a time limit to complete the arbitral proceedings, qualification of arbitrator and confidentiality of arbitration proceedings, etc., was fulfilled by the Arbitration and Conciliation (Amendment) Act, 2019. In present scenario there is a separate institution namely The Arbitration Council of India constituted intending to remove burden from the court regarding appointment of arbitrator, to certify the arbitral institutions and upgrade arbitrators from time to time and this body provides comprehensive list of well skilled-qualified arbitrator to resolve the disputes between the parties with quick process in limited time. This is a positive step towards Arbitration in India to make it a hub in the international community by enhancing the transparency or reliability of the process of appointment of Arbitrator and ensuring speedy justice efficiently and effectively. Further, it is concluded that the Arbitration and Conciliation Amendment Act, 2019 emerged as a significant amendment to smooth the process of arbitration but this amendment contains certain deficiencies such as it limited the scope of applicability of Arbitration and Conciliation (Amendment) Act,2015 by restricting its application retrospectively.
Issues along with suggestion
The Arbitration and Conciliation (Amendment) Act,2019 with no doubt emerged as a significant amendment but this amendment Act has certain loopholes which can be filled up with the following suggestions: –
- Issue– No provision for penalty of disclose of arbitral proceedings on parties to the arbitration and the arbitral authority.
Suggestion– As arbitration contains civil proceedings so there should be a specified nominal monetary penalty on the parties to the arbitration as well as on the arbitral authorities. In R. Rajagopal v. State of Tamil Nadu (Auto Shankar Case) The Supreme Court of India expressly held that “right to privacy” or ‘right to be let alone’ is guaranteed by Article-21 of Constitution of India. A citizen has a right to safeguard the privacy of his own, his family, marriage, procreation, motherhood, child-bearing and education among other matters. None can publish anything concerning the above matters without his consent whether truthful or otherwise and whether laudatory or critical. If he does so, he would be violating the right of the person’s concern and would be liable in an action for damages. This rule is subject to an exception that if any publication of such matters is based on public records including court record it will be unobjectionable.
2. Issue – No specification of matters which are exempted from the confidentiality of arbitration of proceedings.
Suggestion: –The Act should specify matters in which the information regarding arbitration proceedings can be disclosed off. The specification can be done on the basis if matters of arbitration affect public order.
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