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CRITICAL ANALYSIS OF 2019 AMENDMENT IN ARBITRATION AND CONCILIATION ACT 1996

Author: Nihal Kumar Singh, IV year of BBALLB (Corporate Law Hons.) from University of petroleum and energy studies, Dehradun.


ABSTRACT

"Differences we shall always have but we must settle them all, whether religious or other, by arbitration." By mahatma Gandhi. Outside court settlement mechanism is always preferred over any other kind of dispute resolution. In this entire article I have enlighten how as per time there has been a shift in the legislation to meet with current scenario. This article focused mainly upon the amendment that has been brought by 2019 amendment in arbitration and conciliation act 1996. I have also examined the modification made by legislature to promote arbitration and to prevent the court intervention while in the appointment of arbitrator and the role of arbitral council of India. This article made a clear distinction from the earlier amendment made in arbitration and conciliation ac 1996.

Keywords: Arbitration, Arbitrator, Arbitral Council, Arbitral Award, Interim Measures.


INTRODUCTION

The failure of arbitration and conciliation act 1940 lead to the enactment of Indian arbitration and conciliation act 1996 and came into force on 22nd august 1996. It was based upon the UNICTRAL model law on international arbitration. Now the entire purpose of having an arbitration is same throughout the several amendments that there should be a speedy disposal of dispute and there should be less court intervention for this reason the act has underwent several amendment to achieves its primary object. In the year 2019, the legislator under the committee of justice B.N. Sri Krishna framed arbitration and conciliation bill 2019 and on 9th of august 2019 It got the assent of president and came into force.


Objectives

Inspite of having the arbitration and conciliation (amendment) act, 2015. The main objective of having 2019 amendment is to meet the primary objective of having arbitration in India. The 2019 act, to further strengthen and correct the mistakes that were made by earlier act and make it cost friendly, speedy disposal, cost effective and time bound. Now to broadly categories the objectives

To reduce the courts intervention- Before the enacted of said act, when there is no arbitration agreement for the appointment of arbitrator then the chief justice of India or concerned High court CJI would appoint them this is further changed by 2015 amendment and now this power was designated to supreme court and respective high court. After the 2019 amendment such appointment shall be done by arbitral institution. This initiative has reduced the court intervention in arbitrator appointment.


The issue or mistake that were left unturned by 2015 amendment-The 2019 act focused upon the (amendment in section 23,29A) which is regarding the time limit for completion of pleading within a prescribed time limit. For speedy disposal the arbitration proceeding need to be completed within a period of 12 month and the relaxation time which was earlier 18month was reduced to 6 months to make the entire proceeding cost and time efficient.


MAJOR CHANGES THAT WERE BROUGHT BY 2019 AMENDMENTIN THE ARBITRATION AND CONCILIATION ACT 1996

Appointment procedure for an arbitrator under section 11

The amendment has brought a significant change in the appointment of arbitrator. The question which was raised prior to the 2019 amendment regarding to the power of appointment whether it is a judicial power or the administrative power of the court. To examine this question in the case of Konkan railways corporation v Mehul construction[1]three judge benches held that the order passed by the chief justice under sec 11(6) is administrative in nature and the intervention by the court is possible in a case where the chief justice of his nominee wrongfully refuses to make an appointment.


This judgement was later on reversed in the case of Konkan Railway Corporation v. Rani construction - A five judge benches overruled the previous judgement and held that the power of CJI in the appointment of arbitrator is judicial in nature which means that the court can after the validity of arbitration agreement can go into the merit of the dispute. And the same judgement was upheld in the case of S.B.P & co. v Patel engineering and Anr[2] in this case the court noticed that the section 11(7) of the act made the decision of the of the chief justice final and after the valid arbitration agreement the court can exercise its judicial function.


Another case which has brought some change in the interpretation of sec11 was National Insurance co. ltd v. Bokhara polyfab[3] the court has varied its view from the preceding judgment and has categorized the issue which the court can or cannot decide. The first category that the court must examine whether there exists an arbitration agreement. The second category which the court should examine is whether the claim is time barre or not. The third category which the court should not examine is to go into the arbitrability of the case or into the merit of the case.


After the 2015 amendment in the section 11 still it was found in various case that the court were exercising it judicial power and the interpretation made by the court were not in conformity with section 11. 2015 amendment failed to reach the minimal court intervention and it was seen that still India as an arbitration- unfriendly. Now by the enacted of 2019 amendment these controversies have been settle and the power of court while appointing is purely administrative one.


Prior to 2019, the arbitration institution was not recognized. Now the Supreme Court and the high court have power to designate arbitral tribunal institutions that are graded by the arbitration council of India (ACI) to promote arbitration in India[4]. This mechanism seems to match the norm of international jurisdiction such as Hong Kong[5]. The amendment made in 2019 has omitted sec 11(6A) which talks about the examination of arbitration agreement by the court, sec 11(7) where the decision made by the court is final and (10). the reason for repeal to suppress the power of court intervention in the arbitration.


The amendment act has also expediate the arbitration proceeding earlier disposing the application for the appointment of arbitrator to be done within 60 days. Now this time limit has been reduced to 30 days. Regarding the fees for the arbitrator mentioned under IV schedule has also been changed by the amended act


Setting up for arbitral council of India (ACI)

By the 2019 amendment part 1A was added and established the arbitration council of India (ACI) which is an independent body. With a clear aim to promote arbitration and all other form of alternative dispute resolution mechanism. ACI is consist of person who is (i) a judge of Supreme Court or of a high court (ii) an eminent person who is expert in arbitration, (iii) an academician. This diversity in representation shows that ACI has not only focused upon the legal background but also the expert from other sectors, it has given a path to develop arbitration in business and other corporate so that India could match and become arbitration friendly globally and match with country like Singapore. The council have numerous duties and responsibilities. To promote arbitration and to reduce the scope for judicial intervention there is uniform standard for conducting the proceeding, to grade the arbitral institution, establish and maintain the depository awards. ACI not only promote but also act as a regulator, even though it is party autonomy process but for making it progressive it acts as a regulationsInterim measures under sec9 & sec 17.


Prior to the amendment where was a confusion relating to the interim measures given by court under sec9 and interim measures given under 17 as the remedies under both these section are quite similar but the differences lies after the 2019 amendment by omitting the phrase or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36”[6]which means that all the interim measures that a party can seek from the tribunal is only during the arbitral proceeding. Now if the party wish to get the interim measures before or after the award is made but before it is enforced in that case the remedies can be availed only through court under section 9. Once the award in made by the tribunal it becomes functus officio. Another interesting question regarding conflict is whether the application can be made under both the section parallel, the answer is affirmative only when the application under section 17 is pending then only the party can reach the court otherwise the power between the two organ is same and it is always considered to first reach the tribunal for any interim relief.

Setting aside of arbitral award under sec 34

Whenever the parties wish to set aside the award made by the tribunal, they have the recourse available under sec 34(2). Now the 2019 amendment has replaced the word “furnishes proof that” with the phrase “establishes on the basis of the record of the arbitral tribunal that”7the reason for this modification is to limit the scope of judicial mind. Earlier the court based on furnish proof they entertain fresh evidence laid by parties to confine the security of the court “the record of arbitral tribunal”. Which means that to challenge the award of tribunal the parties need to raise the objection or challenge before the tribunal itself during the arbitral proceeding or where the award is made then also to challenge it immediately before the tribunal after that the party can bring the application before the court. There was a conflict view and practises between different high courts. Some treat “furnishes proof” as a part and partial of court proceeding to furnishes evidence. While some were against it.


In the case of Fiza Developers & Inter-trade Pvt. Ltd. v. AMCI (India) Pvt. Ltd. and Anr[7], it was held that under sec 34 the court has no power to frame any issue as they did in a suit and sec 34 is a summary proceeding. Another case M/s Emkay Global Financial Service[8] it was held that the application under sec 34(2) will not require anything more than the record before the arbitrator.


Time period for completion of arbitration proceeding

The attempt has been made in two specific sections to meet the primary objective of arbitration that is speedy disposal of a dispute. The amendment made under sec 29A which has strictly reduced the time period for making of an award. Earlier the time limit was 12 months form the date when the reference is made to the arbitrator but the present amendment act has replaced the starting date of the time limit now the time limit will commence from the date of completion of pleading[9]. The maximum extension that is allowed upon the consent of parties is 18 months. If they further want to extend the time then the application will be made to the court. By the amendment in 29(4) when such application is pending before the court then also the tribunal can continue with the proceeding[10]. This mechanism is added to avoid the delay.


Another change made by the amendment by insertion of sec23(4) where the parties are required to complete its pleading with the time limit of 6 months from the date the tribunal is constituted. This has been added earlier the parties to avoid the proceeding, or to create a multiplicity of proceeding or intentionally harassing the other party by causing the delay. To avoid and to create a guard upon such mischief amendment was made.


Applicability of amendment act 2015

The amendment act 2019 added sec 87 has clarified the long debate upon the applicability of 2015 amendment act whether the amendment act 2015 would be applicable retrospective or prospective which was created by sec 26, which states that the amendment made by 2015 would be applicable to ongoing proceeding upon the agreement by the parties. In the case of Board of control for cricket in India v Kochi cricket[11] it was in the context of sec 36 where it was held that 2015 amendment would be applicable retrospective in respect to arbitral proceeding which started before the act. This judgment has been criticized and was a wrong precedent then the 2019 amendment inserted section 87. It has been clarified by sec 87 that 2015 amendment would not be applicable to the arbitral proceeding that have started before the commencement of the 2015 amendment and also not upon the court proceeding arising out of in relation to such arbitral proceeding.


CONCLUSION

After discussing and examining the major changes brought by the 2019 amendment, we can surely make an inference that the legislature has made the modification in the manner as required to meet with the sole objective of having the arbitration. Though we cannot overnight assume that we will match with the arbitration model followed by the leading country such as Singapore, Hongkong. But the changes brought with respect to minimizing the judicial intervention, speedy disposal of dispute, party autonomy is at top, confidentiality of the proceeding, gaining the trust of foreign business and corporate in India and developing and regulating the ACI is a move forward in developing the arbitration in India. Besides these still there has been some loopholes and ambiguities present in the said act. Which will get settled in coming times.


Reference

• Law Commission of India, 246th Report on Amendments to the Arbitration and Conciliation Act,

• Rules of Arbitration of the International Chamber of Commerce

• Singapore International Arbitration Centre Rules, 2016

• THE ARBITRATION AND CONCILIATION ACT, 1996

• the Arbitration and Conciliation (Amendment) Act, 2019

[1] 2000(7) SCC 201. [2] (2005) 8 SCC.618. [3](2009) 1 SCC 267. [4]Section 11 of the Arbitration and Conciliation Act, 1996. [5]Hong Kong International Arbitration Centre (HKIAC) in case of Hong Kong have been entrusted with the responsibility of appointment of arbitrators in cases of disputes in that regard. [6]This was introduced in Section 17 vide the Arbitration and Conciliation (Amendment) Act, 2015.7 Sec 34 (2) the Arbitration and Conciliation (Amendment) Act, 2019. [7] (2009) 17 SCC 796. [8] Civil Appeal No. 8367 of 2018. [9] Section 29A (1), the Arbitration and Conciliation (Amendment) Act, 2019. [10] Proviso to Section 29A (4), the Arbitration and Conciliation (Amendment) Act, 2019. [11](2018) 6 SCC 287.

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