Salient features of the Arbitration & Conciliation (Amendment) Act, 2019 (2/2)

Author: Nikhil Sukhija

Introduction

Soon after the 2015 Amendment Act, Sri Krishna Committee set up by the Government of India which made further recommendations with respect to the arbitration legislations in India. The most important aspect was to move towards institutional arbitration from ad hoc arbitrations for addressing the issue of time-taken and sitting fee charged by the arbitrators.

The focus of 2019 Amendment Act was on:

1.      Institutional Arbitrations;

2.      Clarificatory amendments in furtherance of the 2015 Amendment Act.

Salient features of 2019 Amendment Act are:

1.      Introduction of Part IA, is the new added chapter dealing with the establishment of a statutory body called Arbitration Council of India which is to be setup for promotion of arbitration in India, for training of arbitrators and lawyers in order to increase the quality of arbitration in India including the maintenance of records for the availability of an authentic copy of the judgement.

2.      Insertion of the Eighth Schedule which provided certain qualifications which an arbitrator must possess. These were only in regards to the Indian Arbitration practitioners and has no application to the International Arbitrators whatsoever. The application of eighth schedule is strictly restricted to the Indian practitioners.

3.      Section 11 (Shifting the power from the courts to the institution) has also been amended which provides that the Supreme Court with respect to the International Commercial Arbitration and High Court with respect to the domestic Commercial Arbitration to designate Arbitral Institutions which are graded by the Arbitration Council of India to carry out the process of exercising default power of appointing an arbitrator. Therefore, the entire process will now be shifted from the courts to recognized Arbitral Institutions of credibility. However, it is to mention that this amendment has not been notified for the moment, therefore, as of now the procedure as per the 2015 Amendment Act shall continue to be in force.

4.      A clarificatory amendment was brought about in Section 17. The 2015 Amendment Act had said that the Arbitral Tribunal will have the power to provide interim relief during the pendency of proceedings even after the making of the awards. Now this was erroneous for the reason that once the award is passed the tribunal becomes functus officio under Section 32 of the Arbitration Act, 1996, this part of Section 17 has been amended, it stops at “only during the pendency proceedings” and the part “pertaining to post award” has been deleted.

5.      Section 23 and 29A has also been amended, that is, the period of 12 months will now commence from the completion of pleadings of the parties for which they are given a period of 6 months and thereafter a period of 12 months shall commence.

6.      Section 37 has also been amended, there has been an insertion of non-obstante clause which states that “notwithstanding anything contained in any other law for the time being in force” the appeals will only be governed by the 1996 Act. The background to this amendment is that there was certain confusion which occurred when the Commercial Courts Act, 2015 was introduced contemporaneous with the 2015 Amendment Act, lawyers started filing a second appeal under the Commercial Courts act, so to provide clarity that one could neither go under the commercial courts act nor the letters patent, this amendment was brought about by a non-obstante provision.

7.      The last notable aspect which requires attention is Section 87 which was inserted by  2019 Amendment Act. This was to provide that the 2015 Amendment Act would be prospective in nature and effect with respect to both the arbitration proceedings and court proceedings. However, this amendment has recently been struck down in the Hindustan Construction Company Ltd. and Ors. v. Union of India[1]. Therefore, the situation as it prevails today is that in so far as arbitral proceedings which has been commenced after the 2015 Amendment Act came into force, it will apply to all such proceedings and commencement shall start as per Section 21 when a notice is served to another party. In so far as court proceedings are concerned, it would apply to even those proceedings which are pending before the courts even though the arbitral proceedings had commenced prior to that. So there is a dichotomy with respect to the Arbitral proceedings. It is only that the fresh proceedings commenced after the 2015 Amendment Act came into force and so far as court proceedings are concerned it will apply irrespective of whether they were with respect to the arbitral proceedings that are commenced after or prior to 2015 Amendment Act.

The above is a conspectus of 2019 amendments and even though 2019 Amendment Act came in for serious criticisms by the arbitration practitioners who were practicing in other jurisdictions, the criticisms were actually based on the misconception of the 2019 amendments because they assumed that Part IA was arbitration council of the body was a regulatory body that the qualifications prescribed under Schedule would be applicable to foreign arbitrators who came to India. But the same now has been clarified by the public statements made by the law ministers.

---

[1] AIR 2020 SC 122

For any further queries, clarifications, and suggestions, please feel free to contact the undersigned author or write to us at protalkz03@gmail.com.