Promulgation of the Arbitration and Conciliation (Amendment) Ordinance, 2014 for improving ease of doing business in India

The Government of India had under its consideration, proposals for making Arbitration as preferred mode for settlement of commercial disputes by making it more user-friendly, cost effective and expeditious disposal of cases. The Government of India is committed to improve its legal framework relating to Arbitration. The Law Commission of India in its 246th Report has recommended various amendments in the Arbitration and Conciliation Act, 1996 so that India may become a hub of International Commercial Arbitration.

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, taking into consideration the Law Commission’s recommendations, has approved to amend the Arbitration and Conciliation Act, 1996. Urgent steps need to be taken to project India as an investor-friendly country having a sound legal framework. There has been a long pending demand for reform in this crucial area for improving ease of doing business in India. Since Parliament is not in session and urgent steps are needed to be taken, the Government has decided to issue an Ordinance to give effect to the proposed amendments.

The salient features of the proposed amendments are as under:-

(i) Insertion of a new provision to provide that Arbitrator shall charge composite fees for disposal of case and not on the basis of per sitting or per hearing, as has been the practice.

(ii) Insertion of a new provision that the Arbitral Tribunal shall make its award within a period of 9 months. If the Court finds that the Arbitrator has delayed the matter for his personal benefit, it may debar the Arbitrator from taking fresh arbitration for 3 years.

(iii) Amendment of Section 34 relating to grounds for challenge of an arbitral award, to restrict the term ‘Public Policy of India’ (as a ground for challenging the award) by explaining that only where making of award was induced by fraud or corruption or is in conflict with the fundamental policy of Indian Law or is in conflict with the most basic notions of morality or justice, the award shall be treated as against the Public Policy of India.

(iv) A new provision to provide that application to challenge the award is to be disposed of by the Court within one year.

(v) Amendment to Section 36 to the effect that mere filing of an application for challenging the award would not automatically stay execution of the award. Award can only be stayed where the Court passed any specific order on an application filed by the party.

(vi) A new sub-section of Section 11 to the effect that an application for appointment of an Arbitrator shall be disposed of by the High Court or Supreme Court as expeditiously as possible and an endeavour should be made to dispose of the matter within 60 days.

(vii) A new sub-section of Section 11 to the effect that while considering any application for appointment of Arbitrator, the High Court or the Supreme Court shall only examine the existence of a prima facie arbitration agreement and not other issues. It is also proposed to insert a new sub-section to the effect that the Court while appointing an Arbitrator shall also fix the fees of the Arbitrator.

Apart from above, amendments in Sections 2(l)(e), 2(l)(f)(iii), 7(4)(b), 8(1) and (2), 9, 11, 12(1), 14(1), 16A, 17(3), 23, 24, 25, 28(3), 31(7)(b), 34 (2A) 37, 48, 56 and in Section 57 are also proposed for making arbitration process more effective.