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Highlights of the changes introduced by the Arbitration and Conciliation (Amendment) Act, 2015
30 Oct 2015

Highlights of the changes introduced by the Arbitration and Conciliation (Amendment) Act, 2015

The government of India has taken the ordinance route to introduce far-reaching changes to the Arbitration and Conciliation Act, 1996. These amendments have come into effect immediately. However, if the Ordinance is not approved by the Parliament within 6 weeks from the start of winter session it shall lapse.

Part I of the Act made applicable on International Commercial Arbitration with seat outside India[1]

Part I of the act has been made applicable on International Commercial Arbitration even in instances where the seat of the arbitration is outside India. The parties have however been given the freedom to exclude the applicability of Part I of the Act by entering into an agreement to this effect. The limited purposes for which Part I of the Act has been made applicable on to International Commercial Arbitration where the seat of arbitration is outside India, are:
·  Seeking interim relief from courts [section 9]
·  Seeking the assistance of the court in taking evidence [section 27]
·  Appealing against the order of a court where the court refuses to refer the parties to arbitration. [section 37(1) (a)]
·  Restricting the right to second appeal and preserving the right of parties to approach the Supreme Court in appeal. [section 37 (3)]

Fast-tracking Arbitration in India

Time limit for making award[2]

Award within 12 months

The arbitral tribunal is statutorily obligated to deliver an award within 12 months from the date when arbitral tribunal enters into reference. The arbitral tribunal is said to have entered upon the reference on the date on which the arbitrator(s) have received notice of their appointment.

  Maximum delay of 6 months

The award can be delayed by a maximum period of 6 months only under the special circumstances where all parties give their consent to such extension of time.

  Mandate of arbitrators to terminate automatically

Where the award is not made out within the statutory period the mandate of arbitrators shall automatically terminate.

Additional Fees for faster disposal

Where the Arbitral Tribunal delivers the award within a period of 6 months the arbitral tribunal shall be entitled to additional fees. The quantum of such additional fees shall be determined by the parties.

Extension granted by the court 

It is open for the courts to extend the time period for making an award upon receipt of an application by any of the parties. Such extension is to be granted only for sufficient cause and the court in its discretion may impose the following penalties depending on the facts and circumstances of the case:
·  Reduce the fees of arbitrators by up to 5% for each month of delay.
·  Substitute one or all the arbitrators.
·  Impose actual or exemplary costs on any of the parties.

Fast Track Procedure[3]

The parties to an arbitration may choose to opt for a new fast track procedure either before or after the commencement of the arbitration. The award in a fast track arbitration is to be made out within six months. The salient features of the fast track arbitration are:
·  Dispute are to be decided based on written pleadings only.
·  Arbitral Tribunal shall have the power to call for clarifications in addition to the written pleadings where it deems necessary.
·  Oral hearing maybe held only if all the parties make a request or if the arbitral tribunal considers it necessary.
·  The parties are free to decide the fees of the arbitrator(s). In contrast, for a regular arbitration the government has introduced a model fee within the Act.

Appointment of Arbitrators

  Appointment within 60 days

Whenever an application for appointment of Arbitrator(s) is moved before a court such application shall be disposed of as expeditiously as possible and an endeavor shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party[4].

  Determination confined to the existence of a valid Arbitration Agreement

Where an application for appointment of arbitrators is moved before a court, the court while appointing arbitrators shall confine itself to the examination of the existence of an arbitration agreement[5].

Oral arguments to be held on a day-to-day basis[6]

Oral arguments as far as possible shall be heard by the arbitral tribunal on a day to day basis and no adjournments shall be granted without sufficient cause. Provision for imposition of exemplary cost on the party seeking adjournment without sufficient cause has also been made.

Interim Reliefs by courts

Arbitration to commence within 90 days of interim relief[7]

Where the court grants interim relief before the commencement of arbitration, the arbitration must commence within 90 days from such order of interim relief. The court however has been given the authority to extend the period within which the arbitration must commence, if it deems such extension necessary.

No Interim relief by courts after commencement of arbitration[8]

The ordinance prohibits courts from entertaining any application for interim relief once the arbitration has entered into reference, unless the court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.

Powers of Arbitral Tribunal

Interim Relief[9]

The parties to an arbitration can now directly approach the arbitral tribunal for seeking interim relief on the same grounds as were available to the parties under section 9 of the previous act. Further, the tribunal has now been granted the powers of a court while making interim awards in the proceedings before it.

Arbitral tribunal not bound to rule in accordance with terms of the contract[10]

The arbitral tribunal was previously bound to deliver an award in accordance with the terms of the agreement and was required to take into consideration the ‘usages of the trade applicable to the transaction’. Vide the Ordinance the arbitral tribunal has been freed of the obligation to only rule in accordance with the terms of the agreement. The arbitral tribunal is only required to take the agreement into account while delivering its award and is free to deviate from the terms of the agreement if the circumstances so warrant.

Independence, Impartiality and Accountability of Arbitrators

Fixed fees for arbitrators[11]

The Ordinance in the Fourth Schedule prescribes the model fees for arbitrators and the High Courts have been assigned the responsibility of framing the rules for determination of the fees and the manner of its payment.
However it is clarified that such fees shall not be applicable in International Commercial Arbitration and in cases where parties have agreed for determination of fees as per the rules of an arbitral institution.
A fixed fee structure ensures the independence of the arbitral tribunal and also provides a reasonable cost estimate to the parties entering into arbitration.

Obligations of arbitrators at the time of appointment[12]

Disclose conflict of Interest

An arbitrator who is approached for appointment is obligated to disclose the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality. A fifth schedule has been added to the Act to enumerate instances which would be taken into consideration for determining any conflict of interest.

  Disclose time constraints

An arbitrator shall disclose all circumstances which may affect his ability to deliver an award within 12 months.

  Form of disclosure

A specific form of disclosure has been prescribed in the sixth schedule of the act and all disclosures are required to be made in the said format for the sake of removing any ambiguity and maintaining uniformity.

  Disqualification from appointment

The specific circumstances which shall act as a bar against any person from being appointed as an arbitrator in a dispute, have been enumerated in the seventh schedule. However, the parties to the dispute have been given the opportunity to waive the applicability of the seventh schedule, if they so deem fit.

If you have any suggestions or any further queries regarding the subject please contact Mr. Vaijayant Paliwal at: [email protected]        

[1] Proviso to Section 2 (2)
[2] Section 29A
[3] Section 29B
[4] Section 11(13)
[5] Section 11 (6A)
[6] Section 24
[7] Section 9 (2)
[8] Section 9 (3)
[9] Section 17
[10] Section 28 (3)
[11] Section 11(14)
[12] Section 12