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India aspires to be a jurisdiction that is arbitration-friendly. Every time a new amendment an act is
introduced, it arrives with a fresh set of regulations. The Arbitration and Conciliation (Amendment)
Act, 2019 was introduced in Rajya Sabha by Mr Ravi Shankar Prasad, Minister for Law and Justice
on 15.07.2019. The bill was initially called the Arbitration and Conciliation (Amendment) Bill, 2018,
which was pending before the Rajya Sabha after being passed by the Lok Sabha, however, the Lok
Sabha was dissolved. Subsequently, it was introduced with minor changes by the Minister of Law and
Justice in the Rajya Sabha on 15.07.2019 and was passed by Rajya Sabha on 18.07.2019. It seeks to
amend the original Arbitration and Conciliation Act of 1996. The 2019 Amendment Act includes
various recommendations made by the High-Level Committee chaired by Justice B.N. Srikrishna, a
retired judge of the Supreme Court of India.
One of the most important amendments is the introduction of the Arbitration Council of
India is to encourage arbitration, conciliation, mediation and other forms of alternative
dispute redressal mechanisms. This is going to be talked about thoroughly in this article.
Another key amendment is the amendment to Section 11 of the Arbitration Act
which inter alia provides for the appointment of the arbitral institutions by the courts
when parties disagree upon the appointment of arbitrators. This would help in decreasing
the backlog of cases in the courts and will reduce its burden to a certain extent.
By the amendment of subsection (1) of Section 29A, the time period allotted for
International Arbitrations to pass an award for all the arbitration proceedings within 12
months has been removed. However, the tribunals must attempt to finish the international
arbitrations issues within 12 months. For other arbitrations, the upper time limit has been
changed from the entry date upon the reference of the tribunal to the completion of the
pleadings of parties.
Section 42A has been inserted into the Act which provides for confidentiality of
arbitration proceedings. The arbitration proceedings ought to be kept confidential by the
arbitrator and the arbitral institution except for implementing or enforcing the award
which is necessary.
In the Amendment Act, immunity has been provided under Section 42B to the arbitrators
for any act or omission made in the course of the proceedings, if the act or omission was
done in good faith. This means they shall not be subject to a suit or legal proceedings for
anything done bona fide during the proceedings.
By insertion of Section 87 to the Amendment Act has clarified a long-standing ambiguity
of the prospective or retrospective applicability of the 2015 Amendment Act. It is clarified
under Section 87(b) that the applicability of 2015 Amendment Act prevails only for
arbitral proceedings which have commenced on/after October 23, 2015.
About the ‘Arbitration Council of India’
Part 1-A introduced to the Arbitration Act empowers the central government to establish the
Arbitration Council of India as an independent government body.
Functions
According to the act, the main functions of the arbitration Council would be as follows:
The Act says that the ACI will be headed by the Chairperson who will be appointed by the Central
Government in consultation with the Chief Justice of India. The chairman should be from the
following categories:
1. Chief Justice of a High Court or
2. A judge from the Supreme Court or
3. A judge from a High Court or
4. An eminent person with expert knowledge of arbitration.
Members
The Council’s head office shall be situated in Delhi. The council with prior approval of the central
government may establish its offices other than Delhi.
Tenure
The chairperson, as well as the members, shall hold office for a term not more than 3 years from the
date of their joining. For the chairperson, the maximum age limit is 70 years and for the members, it is
67 years.
He shall be responsible for all the day-to-day administration of the Council. The qualifications
required, appointment and several such terms and conditions shall be in order as prescribed by the
Central Government. The CEO has to perform functions as may be prescribed by the Central
Government.
Removal of a member
Removal of a member of the Council for Arbitration may take place under the following cases:
1. If he is an undischarged insolvent, or
2. If he has engaged in any paid employment during his term of office (except part-time
member), or
3. If he has been convicted for an offence, which involves moral turpitude in the view of the
Central Government, or
4. If he has acquired some financial or other interest which is likely to affect the prejudice of
his functions as a member, or
5. If he has abused his position
6. If he has become mentally or physically incapable to carry out his functions as a member.
No member shall be removed on the grounds (4) and (5) unless the Supreme Court on the
recommendations of the Central Government has held upon inquiry that the member ought to be
removed on such grounds.
Recommendations of Sri Krishna Committee
Following the 2015 amendment, the Central Government set up the high-powered committee chaired
by Justice Sri Krishna. The committee had various recommendations for the Act. Fortunately, these
recommendations were put into flesh and blood by the 2019 Amendment Act. However, many
recommendations that were actually beneficial for boosting arbitration were not incorporated in the
Act. Instead, some amendments that were antithetical to the idea of propagation of arbitration were
added to the Amendment Act. Some recommendations which I came across are as follows:
The amendments were made to transform India into a global hub of arbitration by establishing an
independent body. This body will lay down standards that are international in nature to enable a cost-
effective, user-friendly and speedy system of arbitration.
Appointment of arbitrators
The Arbitration Council shall have the duty to promulgate arbitration, mediation and other alternative
dispute resolution mechanisms. Under the Amendment Act, the Supreme Court and High Courts may
now designate arbitral institutions. It may decide which parties can approach for the appointment of
arbitrators. For instance, in the case of international commercial arbitration, the Supreme Court will
designate an institution which will appoint the arbitrators. In case of domestic arbitration, the
concerned High Court will designate an institution for the appointment of arbitrators. In case there is
the unavailability of an arbitral institution, the Chief Justice of the concerned High Court may form a
panel of arbitrators to carry out the functions of the arbitral institutions. This will lessen the burden of
the courts.
Qualifications
The Amendment Act aims to make India an arbitration-friendly country globally. However, the
question arises as to whether a foreign legal professional can act as an arbitrator or not given the
addition of Schedule 8 to the Act. This Schedule lays down the qualification of the arbitrator who is to
be chosen for the council which is governed by the Advocates Act, 1961. The parameters are that the
person should be at least one of the following:
In the case of Bar Council of India vs A.K. Balaji and Ors, the Hon’ble Supreme Court passed the
judgement that foreign lawyers/firms are not entitled to practice law in India be it the litigation side or
non-litigation side unless they satisfy the conditions of the Advocates Act, 1961 and the Bar Council
of India Rules.
Intervention of government
The composition of this Council seems problematic given the private nature of arbitral institutions.
The involvement of the government in the regulation of arbitrators and arbitral bodies contravenes the
idea of arbitration. For in many cases, the Government of India may be a party to the arbitration. An
arbitration conducted under a ‘government-administered’ council where the government is also a
party depicts a clear case of conflict of interest and lies against the principles of natural justice as
there may be an element of bias present. The courts’ choice in designating the arbitral institutions may
be limited given the Council’s power of grading such institutions. The courts can be disabled from
designating an ungraded institution of great potential and acclaimed popularity for its facilities of
offerings which want to remain independent and sustain without going through administrative barriers
of being graded by the Council.
Paradox of section
In an International Commercial Arbitration, parties may move to Indian Courts under Section 11 of
the Act for appointment of an arbitrator in case they are having disagreements regarding the same.
According to clause 9 of Section 11 of the Act, the appointed arbitrator should not belong to the
nationality of either of the parties. If the panel of arbitrators consist only of Indian nationals, the
question arises how will the court appoint an arbitrator of a different nationality?
Conclusion
The 2019 Amendment Act makes an attempt at removing some of the difficulties that were imposed
by the 2015 Amendment Act during the conduct of arbitration and court proceedings. Formation of
the ACI, An increased role of arbitral institutions, separate time frame for ending the pleadings,
immunity provided to the arbitrators are all positive changes which should encourage India to be an
arbitration-friendly nation. However, there are some lacunae present in the current Act especially
regarding the formation of the Arbitration Council of India as discussed in this article. The
implementation of this Amendment Act would ultimately be the key to its failure or success.