Changes in Indian Arbitration Law

The Arbitration and Conciliation Act, 1996 failed to achieve its object to provide cost effective and speedy dispute resolution unlike the litigation. Therefore, Arbitration Act 1996 was amended in 2015 for ushering the reforms mooted for many years. Amended Act  broadly make following changes to address the lacunae of the 1996 Act;

Interim relief in foreign arbitrations- S.2- A new  proviso has been added in Section 2 which stipulates that Subject to an agreement to the contrary, the provisions of section, 9, 27 and clause (a) of sub-section (1) and Subsection (3) of section 37 shall also apply to International Commercial Arbitration even if the place of Arbitration is outside India, and an arbitral award made to or to be made in such places is enforceable and recognized under the provisions of Part –II of the Act. This address that lacuna by reverting, in part, to the Bhatia principle; that is, only two provisions in Part-I of the Act - pertaining to court’s power to grant interim relief (Section 9) and render assistance in taking evidence (Section 27), along with their respective appeal provision - would apply to international arbitrations held outside India, unless where parties, by agreement, have excluded the applicability of such provisions. With this new provision Indian courts will continue to have jurisdiction to pass interim relief or assist in taking evidence, even in international arbitrations outside India.
Mode of Communication - email recognized as an authentic communication for forming Arbitration Agreement ( S.7) .

Time limit for initiating Arbitration after Interim order (S.9)- If any Interim Order is passed by the Court under S.9, the Arbitration proceedings shall be started within 90 days from date of Interim Order.

Limited role of the Court in granting Interim Relief - Sec.9 – Once the arbitral Tribunal has been constituted, the Court shall not entertain application for Interim measure unless the circumstances exist which may not render the remedy provided under section 17 efficacious.  

Appointment of Arbitrators ( S.11)

a) Power to appoint arbitrators in domestic arbitrators shall rest with the High Court (or institution designated by it). In case of international arbitrations, the power to appoint shall vest with the Supreme Court (or institution designated by it);

b)  An application for appointment of arbitrator shall be disposed of as expeditiously as possible and endeavor shall be made to dispose of the application with 60 days from date of service of notice to other party.

c) A decision appointing an arbitrator is final and no appeal including Letters Patent Appeal shall lie against it;

d) High Court may frame rule for the purpose of determination of the fee of the Arbitral Tribunal in domestic Arbitration.

Fee of arbitrators- Fourth Schedule S.11

a) While appointing arbitrator(s), Court may fix fee after taking into consideration the fee set out in Schedule IV – The fee structure has been given Schedule IV. Minimum fee is Rs. 45,000/- with an increase of 0.5% to 3.5% of the claim amount with a ceiling of Rs. 30 lacs where claims are for or over Rs. 30 crores;

b) In cases where a sole arbitrator is appointed, 25% extra fee over and above the fee prescribed in the schedule shall be paid;

c) The aforesaid schedule of fee shall not be applicable to international Commercial Arbitration and in arbitration (other than International Arbitration) where the parties have agreed for determination of fee as per the rules of Arbitral Institution;

d) Separate fee is payable if counter claims are filed.

Declaration by the Arbitrator (S.12) - Before appointment, an arbitrator has to declare that he is independent and that he has enough time to conclude the arbitration in 12 months

Schedule VII provides instances where a person is not eligible for appointment as arbitrator – such as where he is an employee or consultant of or has a controlling interest in or personal relations with any party or its affiliate or advocate. However, the parties may waive the applicability of this provision. Further this provision shall not be applicable to those case where the Arbitrator has been appointed prior to 23rd October, 2015.  

Power of Arbitral Tribunal to grant Interim Relief – S.17 –During the Arbitral proceedings or at any time after making of the Arbitral Award but before it is enforced, the Arbitral Tribunal shall have the same power for making interim orders as the Court has and subject to any order passed in appeal under section 37, any order issued by the Arbitral Tribunal under the CPC,1908, in the same manner as if it were an order of the Court. Thus the order under Section 17 shall be as good as order passed under section 9.

Time Limit for making Arbitral Award- S.29 A- Arbitral Tribunal has to make the award within 12 months from the date the Arbitral Tribunal enters upon the reference. This period can be further extended for a further period of 6 months with the consent of parties. If the award is made within 6 months, the Arbitral Tribunal shall be entitled for incentive. If the award is not made within stipulated time the mandate of the Arbitrator ( s) shall be terminated unless the Court has extended the period. Application seeking extension of time has to be disposed of by the Court within 60 days;.

Penalty on Arbitral Tribunal- (S.29 A) If the court finds that proceedings have been delayed for the reasons attributable to the Arbitral Tribunal, it may reduce the fee of Arbitrator(s) by not exceeding 5% of each month of such delay.  

Fast Track Arbitration – S.29B – The parties may agree to the fast track procedure, in that case the Arbitral Tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without oral hearings. The oral hearing shall be held only on request of the parties for clarification of certain issues only. The Award shall be made within 6 months from the date the Arbitral Tribunal enters upon the reference. 

Increased rate of future interest & cost- S. 31 - Future interest shall be paid @ 2% over the current rate of interest unless otherwise stated so in the award;
Actual costs shall be awarded – general rule being that the unsuccessful party is to be saddled with all costs incurred by the successful party.

Limited Grounds of Public Policy –S.34

a) Section 34(2)(b) has been made more specific in consonance with the Associate Builders judgment, public policy is defined as under;
Award shall be treated in conflict of public policy of India on if;
i) The making of the Award was induced or affected by fraud or corruption or was in violation of Section 75 or S. 81 or
ii) It is in contravention with the fundamental policy of Indian law; or
iii) It is in conflict with the most basis notions of morality or justice.
 An award can be set aside by the Court, if the Court finds that the award is vitiated by the patent illegality appearing on the face of award but shall not be set aside merely on the ground of an erroneous application of the law or by appreciation of evidence.
b) Before filing application under Section 34 opposite party has to be given prior notice.
c) Application under section 34 has to be disposed of within 12 months from the date of service of notice on other party.

No automatic stay of Award (S.36)- The award shall not be automatically unenforceable merely on filing of the application under Section 34. The court may grant stay of the operation of Award provided the party seeking award deposit money as directed by court.   

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