The Future of Arbitration in India: Improvising the Alternative Dispute Resolution Process.
Ahir Mitra 5 Jul 2021

The Future of Arbitration in India: Improvising the Alternative Dispute Resolution Process.

Alternative Dispute Resolution is a range of dispute settlement method which helps the parties to settle their dispute outside the court. These methods involve a third party, who helps the parties to settle their disputes in a hassle-free manner. According to the Law Commission of India, 222nd Report, the Constitution guarantees equal access to justice for all citizens, primarily through Article 39A[1], which states that everyone must have an equal opportunity to obtain justice, which must not be denied to any citizen due to economic or other types of disabilities.

The Arbitration & Conciliation (Amendment) Act 2021 is a recent addition to the pro-arbitration perspective. This is the third time the Act of 1996 has been amended in the last six years, demonstrating the legislative desire to change the Act of 1996 and make India a more arbitration-friendly jurisdiction. The most important change in the Act of 2021 is an amendment to Section 34 regarding the automatic stay of awards made under the Principal Act. Under the current system, a party can apply to the Court for the setting aside of an arbitral judgement under Section 34.[2] However, following the 2015 change to the Act, an automatic stay on the award's execution would not be obtained simply by filing an application to set it aside.

In the case, Prakash Industries Limited v. Bengal Energy Limited and ors,[3] the court was asked to examine the scope of a modification to an arbitration application submitted under Section 34 of the Arbitration Act. The court stated that what needs to be determined is whether the grounds sought to be added through an amendment are necessarily new and independent grounds that did not have a foundation in the original Section 34 application; this means that each case must be decided on the nature of the amendments. According to the Calcutta High Court, the criteria for accepting or rejecting a modification to existing reasons in an arbitration case is whether the suggested grounds would entail filing a new motion for setting aside the decision. As a result, the court dismissed the amendment application, reasoning that because several of the new grounds did not have a foundational basis in the existing petition, the petitioner could not enter through the 'amplification' route, as claimed, and that if the amplification recourse fails, the petitioner has no other statutory cushion to fall back on under the existing law.

The 2021 Amendment made a significant change by adding a proviso under section 36(3)[4] to ensure that if courts are prima facie satisfied by the case based on either the arbitration agreement or contract that is the basis of the award; or the award was induced or influenced by fraud or corruption, the award will be upheld. It will stay the award indefinitely awaiting the outcome of the challenge. In the case Mohini Electricals ltd v. Delhi Jal Board,[5] where the Delhi high court stated that an arbitrator has no statutory rights to direct that the stamp duty to be paid in a specific period of time. Therefore, there is no obligation to pay the stamp duty at the time of pronouncing or signing of the award.

In situations where an application under Section 36(2) of the Act is awaiting adjudication before a court, the applicants will be required to file fresh applications based on the new grounds. Unless the courts can take notice of this new modification on their own and dispose it off with  filing of fresh submissions, this is likely to result in delays and additional expenses. Despite the use of words, the law minister claimed that fraud and corruption under Section 34 were essential since the latter did not offer an "automatic stay" of the award. He went on to say that the government intended to avoid collusive attempts by parties to gain from a tainted award as soon as possible.

In this area, there were two amendments; however, because they are interconnected, they were addressed together. Section 43J of the Principal Act was included in the 2019 Amendment, which defined the criteria, eligibility, and standards for arbitrator accreditation. The Act's Eighth Schedule, which offered a comprehensive list of qualities that an arbitrator must possess, was also directed by this provision. Section 43J[6] was substituted in the 2021 Amendment Act, and Schedule Eighth of the main Act was removed. This basically implies that parties can appoint arbitrators with or without credentials.

The law minister went on to say that this modification will allow the Indian Arbitration Council more freedom and will encourage institutional arbitration. The modification to Section 43J says that arbitrator qualifications would be based on "regulations," which are defined in Section 2(1)(j) to include the Arbitration Council of India's regulations. The Amendment Act, by modifying Section 43J[7], also gives the Commission the authority to examine the appointment of foreign arbitrators, which is supported by UNCITRAL Model Law requirements. This amendment also restores the idea of party autonomy, which allows parties to select arbitrators regardless of their credentials.

Section 43J[8] modification has the ability to attract foreign arbitrators, which is a modest step toward India's Pro Arbitration system. The change on automatic stays of awards, on the other hand, is more of a two-edged sword, having the ability to both prolong things and create barriers to enforcing arbitral decisions. This involves resolving some ambiguities exploited by losing parties in award challenges, which has resulted in a lack of award finality. Allowing an arbitral tribunal to employ various ADR techniques throughout the arbitral processes to facilitate conflict settlement may be more successful, although it is rarely used in India.

[1] The Constitution of India, 1949.

[2] The Arbitration and Conciliation Act, 1996.

[3] 2020 SCC OnLine Cal 971: AIR 2020 Cal 279.

[4] The Arbitration and Conciliation Act, 1996.

[5] 2021 SCC OnLine Del 3506.

[6] The Arbitration and Conciliation Act, 1996.

[7] Ibid.

[8] Ibid.

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