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Arbitration and Conciliation (Amendment) Bill 2021

Author : Sandeep Rana

Introduction

On 12th Feb 2021, Lok Sabha passed the Arbitration and Conciliation (Amendment) Bill, 2021, with the purpose of making India an excellent hub for domestic and international arbitration and in order to address   the issue of corruption or fraud, in securing a contract or arbitral award. The provision of this bill states that all the stakeholders will get an opportunity to seek an unconditional stay of enforcement of arbitral awards, in the case where arbitration agreement or contract or awards is induced by fraud or corruption. It is already operative by manner of an Ordinance published on 4th November, 2020

Main provisions of the Bill

  • It seeks to amend the Arbitration and Conciliation Act, 1996 therefore on
  • To enable automatic stay on awards in certain cases and
  •  To specify by rules the qualifications, experience, and norms for certification of arbitrators.
  • The Arbitration and Conciliation (Amendment) Bill 2021 deal with the domestic and international arbitration.
  • This bill also replaces an ordinance which was issued on 4th November last year.
  • Also does away with the eighth Schedule of the Act that contained the required qualifications for certification of arbitrators.
  • Added a provision in Section 36 of the Arbitration Act and can come into effect retrospectively from Oct 23, 2015. As per this amendment, if the Court is satisfied that a prima facie case is made out that the arbitration agreement or contract that is the basis of the award was induced or affected by fraud or corruption, it’ll stay the award unconditionally pending disposal of the challenge created to the award under Section 34.
  • This bill defines the law for conducting conciliation proceedings.
  • The provision of this bill stated that if an arbitration award is given, an application under section 34 can be given for setting it aside on certain grounds.
  • There is also a provision for a stay on section 36 on the filing of an application.
  •  The second amendment provides that the Arbitration Council of India can frame the eligibility etc. of arbitrators.

Background

Until recently, an arbitration award was enforceable though an appeal was filed against it in the court under Section 36 of the act. The court, however, may grant a stay on the award on conditions because it deemed fit. Earlier, there was no provision to stay the arbitral award in case of fraud or corruption.

Explanation of need of bringing the amendment

  • The provision of this bill gives the option of stay by a court in a case where an arbitral award is given under fraud or corruption.
  • In case, where an arbitral award is given against the central govt. or a state govt. and induced by fraud, and if an investor enforces it, then it is not fair that ‘thousands of crore of taxpayers’ money.

Views of members of Lok Sabha in the favor Of Bill

Law minister Ravi Shankar Prasad aforementioned that freedom should be given to the domestic and international arbitrators to make the method easier so the country will move towards the path of economic development. India respects the honest process and therefore the government is committed to bringing transparent mechanisms in each sphere of governance.

In Lok Sabha, NCP MP Supriya Sule aforesaid that the central govt brings in progressive legislation rather than retrospective legislation for the benefit of business.

 Dr. Alok Kumar Suman, MP said that with amendment to this Bill, eminent arbitrators will be facilitated in conducting arbitration. Amendments to the Section 36 of the Bill have been made to ensure that in case the court finds prima facie that there has been any fraud or corrupt practices in obtaining contract or award, it shall be granted stay conditionally.

Sri Nama Nageswara Rao said that the present Bill seeks to amend Section 36 of the main Act by which the court can stay enforcement of the arbitration award unconditionally. The Government to bring out the regulations at the earliest and in line with the spirit of the Eight Schedule.

Arbitration and Conciliation Act 1996

This act regulates the domestic arbitration in India. This act was amended in the year 2015.

What is Arbitration?

Arbitration, a type of alternative dispute resolution (ADR), is a non-court dispute resolution strategy where the parties to a dispute assign it to one or more arbitrators by whom they consent to be bound by their judgement. That is a mediation strategy in which the facts in the case are checked by a third person and a verdict is imposed that is legally binding on the parties and enforceable. Restricted powers of review and appeals of arbitral award are valid. Legal hearings and mediation are not like arbitration

What is Conciliation?

Conciliation is a voluntary mechanism by which a professional and competent impartial conciliator encourages mediation between the parties to the dispute and allows them to consider their differences and concerns in order to achieve a mutually satisfactory resolution. The mechanism is versatile, allowing the time, structure and substance of the conciliation hearings to be determined by the parties. Rarely are these hearings public. They are value-based, since the conciliator would not only take into consideration the legal positions of the parties