Welcome back to our updates from the world of arbitration.
The 2019 Amendment to the Arbitration & Conciliation Act, 1996 came into effect earlier this month.
As we had noted in a previous edition, the law aims to establish an independent body called Arbitration Council of India (ACI), which will (among other things) frame policies for grading arbitral institutions and accrediting arbitrators, set professional standards for arbitration professionals, and oversee the timely and cost-effective conclusion of arbitrations. This has been done by introducing Part 1A of the Act.
The amendments also contain provisions on the appointment of arbitrators, the timelines to be followed, and the confidentiality obligations of arbitral institutions. Let’s go through some of the key provisions.
– The amendment has restricted the retrospective application of the 2015 amendment to the same law. Those amendments, it has now been made clear, shall not apply to arbitral proceedings that started before the commencement of those amendments or to court proceedings arising out of such arbitral proceedings. Retrospective application is now subject to the consent of the parties to apply it in proceedings.
– Parties, arbitrators and the arbitral institution have to maintain the confidentiality of arbitration proceedings except in cases where the disclosure of the award is necessary during its execution.
– The arbitrators’ powers (introduced through the 2015 amendment) to grant interim relief after the award period but before completing its enforcement, has been removed.
– No suit or other legal proceeding can be initiated against arbitrators for any act done (or intended to be done) in good faith under the Act.
– The arbitrators’ mandate and arbitration proceedings will continue during the pendency of an application under section 29A of the Act for the extension of time.
– The amendment has introduced a new timeline of six months to complete the filing of statements of claims and statements of defence. This period starts from the date the arbitrator received the notice of appointment.
– The amendment also recognizes arbitration institutes designated by the Supreme Court or a High Court, and their powers to appoint the arbitrators.
– Section 34 of the Act has been modified to the extent that only arbitral records may be relied on as proof of the grounds provided in it.
– An eighth schedule has been added mandating qualifications and experience of arbitrators.
– Now, only a prima facie finding by a court that the arbitral agreement is null and void can restrain the parties from referring any dispute to arbitration under Section 45 of the Act.
While some of the amendments may promote India as an arbitration hub by providing for realistic timelines and limited scrutiny of awards, some ambiguities and concerns are left unaddressed, one commentator has noted. This is a classic case of “one step forward, two steps back”, another wrote.
Meanwhile, arbitration centres in India are hoping to be among the world’s best.
From the docket
In Mahanagar Telephone Nigam v. Canara Bank, the Supreme Court held that a party (who is not a signatory to the arbitration agreement) can be bound by an arbitration agreement and subject to the arbitration proceedings under the ‘group of companies’ doctrine where the conduct of the parties shows the intention of the parties to bind the non-signatory party as well. The court remarked that this doctrine would apply particularly when the funds of one company are used to financially support other companies of the same group.
The court also held that an arbitration agreement under Section 7(4)(c) of the Arbitration and Conciliation Act, 1996 could be in the form of an exchange of statements of claims and defence, in which the existence of the arbitration agreement is affirmed by one party, and not disputed by the other party.
In Zenith Drugs and Allied Agencies v. Nicholas Piramal, the Supreme Court has held that an application under Section 8 of the Act can be made to refer only those disputes to arbitration that are specifically agreed to be resolved through arbitration by the parties. Relying on its own decision in 2016 in A. Ayyasamy v. A. Paramasivam and others, the Supreme Court also observed that allegations of fraud that are so complicated that they can only be adjudicated a civil court leading evidence from the parties, should be decided by a civil court.
These were the updates from the world of arbitration in August. Thank you for reading. We will be in your inbox again next month.