Article on "ARBITRATION AND CONCILIATION (AMENDMENT) ACT 2021 LEGISLATIVE COMMENTARY" by Akshit Singhal

 

Akshit Singhal

BENNETT UNIVERSITY

BBA-LLB

2nd Semester

On March 11, Parliament took notice of the 2021 Arbitration and Conciliation Amendment Bill, and it is expected to be passed one day after the House of Commons approved it in February. The bill proposes to amend the 1996 Arbitration and Consideration Act to allow for the use of alternative dispute resolution methods.

 Automatic Stay on Awards

The 1996 Act provides for the filing of a request to annul an arbitration award in some cases, as well as regulations on arbitrator qualifications, experience, and certification standards. The Code has interpreted this clause to mean that when a tribunal files a request to annul an arbitration award, the arbitrary award is automatically suspended.

Because of a change in the law, the arbitration award will no longer be automatically declared invalid just because the parties apply to the court to have it cancelled. The Act states that if the arbitration tribunal determines that the relevant arbitration agreement, contract, or award has been induced or influenced by fraud or corruption, the award may be suspended.

Qualification of Arbitrators

In a separate plan, the application specifies certain qualifications, experience, and accreditation numbers for arbitrators, including arbitrators who must be lawyers with 10 years of experience under the Defenders Act 1961 and Legal Services Agency of India officials.

Arbitrators must also be familiar with the Indian Constitution, according to general rules. The bill repealed the arbitrators' calendar and replaced it with regulations defining arbitrators' qualifications, experience, and standards of certification.

What Does the Act State-

The act made three changes to the principal act

Firstly, in the act section 2 states that

In section 36, in sub-section (3), after the proviso, the following shall be inserted and shall be deemed to have been inserted with effect from the 23rd day of October, 2015, namely:

“Provided further that where the Court is satisfied that a prima facie case is

Made out that,—

(a) The arbitration agreement or contract which is the basis of the award; or

(b) The making of the award,

Was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award

The explanation clause further explain that this provision applies to all court cases arising from or relating to arbitral procedure, regardless of whether the arbitration or tribunal proceedings began before or after the start of the Arbitration and conciliation Act (Amendment) 2015.

The proviso contributes a law that allows the arbitral tribunal to suspend the execution of the arbitration award if the award or the agreement on which the award is based has been clouded by misconducts. The court may remain at the front desk until an Article 34 challenge is filed. This provision will take effect retroactively on October 23, 2015, according to the Amendment's provisions.

Second, in the act section 3 deals with section 43J this says the qualification of the arbitrators-

For section 43J of the principal Act, the following section shall be substituted, namely:––

43J.The qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations.

Section 43J by means of the 2019 Amendment Act was added to the main act. The unmodified part of the act means that the arbitrator's qualifications will be determined by the persons listed Schedule Eight of the Act.

Lastly, in section 4 of the act which state The Eighth Schedule to the principal Act shall be omitted.

 This means that the Eighth Schedule of the main law was deleted in the final amendment. This removal is intended to allow well-known arbitrators to participate in Indian arbitration procedures and ensure that India is promoted to an International Commercial Arbitration Center, according to the revised law's Statement of Object and Reasons.

Judicial Inspection

First, if the arbitration agreement or contract on which the award is based is revoked or influenced by fraud or corruption, the award's execution can be suspended indefinitely. Second, if the arbitration court's "arbitration" is overshadowed by fraud or corruption, the arbitration award's execution will be put on hold indefinitely. Apparently, the legal system knew and adequately resolved this situation.

Corruption or fraud in the Arbitration Agreement

 [1st explanation] Section 34 (2) (b) expressly permits the parties to claim that the arbitral tribunal's decision is ruined by fraud or corruption, or that the ruling is unacceptable to Indian public policy. If the parties are dissatisfied with the revocation procedure, they may file an appeal under Section 37 (1) (c) of the Act.

The parties may choose to follow Section 34 of the act if they are dissatisfied with the arbitral tribunal's decision or if the arbitral tribunal has not considered the fraud allegations after the parties have filed the fraud.

Corruption or Fraud at the Time of Making of Award

[1st explanation] Section 34 (2) (b) expressly allows the parties to ask for the award to be reversed if the arbitral tribunal's decision is tainted by fraud or corruption, or if the award violates Indian public order. If the parties are dissatisfied with the cancellation procedure, they may file an appeal under Section 37 (1) (c) of the Act.

The 2021 amendment does not appear to provide reasonable additional reasons or relief for victims facing fraud as defined by the amendment. Therefore, it can be concluded that the enactment of the 2021 amendment is similar to an additional level of judicial review in the form of an additional layer of appeal review, and this is also a temporary solution with insufficient guarantees. The effect of this extended interference range is detrimental.

Disregarding minimal judicial intervention:

According to Section 5 of the Act, the implementation of the 2021 amendment may result in an increase in excessive judicial intervention in the arbitration procedure, which is contrary to the real reason for choosing arbitration as a method of dispute resolution, which is to avoid the torture of traditional litigation procedures. Furthermore, it will put enormous strain on India's already overburdened courts and case backlog. This will almost certainly lengthen the time it takes for the arbitration award to be enforced in India.

Tool for harassment

Similarly to how most Article 34 requires allegations of violation of public policy, the 2021 amendment could become a powerful tool for the losing party to harass opponents of allegations of fraud or corruption in every arbitration proceeding to delay enforcement of arbitration awards. This will not only increase the cost, inconvenience, and time it takes to resolve disputes, but it will also make innocent parties fearful. This may deter parties from using arbitration as a means of resolving disputes because they will eventually have to go to court to seek redress.

As a result, the 2021 amendment may encourage parties to litigate without regard for checks and balances. Commercial parties are hesitant to begin or continue doing business in India due to the lack of a sound dispute resolution mechanism because they are almost certainly already doing so. They should take their dispute to Indian courts to be resolved.

CONCLUSION

While the ailments that the 2021 Amendment is intended to treat are unknown, the amendment's side effects could be disastrous. The addition of an extra appellate layer of judicial intervention, the multiplicity of proceedings, uncertainty in the application, encouraging a flurry of challenges and opening the Pandora's box qua the arbitrator's liability, combined with the dilution of the 2015 Amendment and failure to uphold the cardinal principle of the arbitration process, i.e., minimal judicial intervention through the 2nd Circuit, have resulted in a flurry of challenges and opened the Pandora's box qua the arbitrator

In a jurisdiction where enforcement of a judgement or award is already difficult, a sudden shift from Indian courts' pro-enforcement approach to empowering courts to grant an unconditional stay on the enforcement of an arbitral award is detrimental to the sacrosanct vested right of enforcement, finality, and binding nature of an arbitral award. This has an impact on contract enforceability and is likely to make businesses nervous about operating in a system where the parties are more likely to face another round of litigation when the arbitral award is enforced, depriving them of the benefits of the arbitral award.

The repeal of the Main Law's Eighth schedule broadens the scope of appointment of arbitrators and foreign arbitrators in a variety of fields. This, however, may result in the appointment of inept arbitrators. It will be necessary for the Indian parties, council, and courts to re-verify the arbitrator's ability, which is inconvenient. When appointing arbitrators under the revised Act, the board and the parties should exercise caution in this case.

Despite these flaws, proper implementation of the amended provisions will help to reduce the number of cases in which parties to arbitration proceedings are harmed by fraud in arbitral awards. Only time will tell whether the Council's regulations will aid in the selection of ideal arbitrators in the Amendment Act's second section.

Bibliography

Arbitration and Conciliation (Amendment) Act, (2021). (n.d.).