Salient Features of the Arbitration and Conciliation (Amendment) Bill 2003 introduced in Rajya Sabha on 22-12-2003

The Major Objectives of the Bill are

To resolve the conflict between some judgments of the High Court under the Act

To bring it in conformity with the UNCITRAL Model Law in certain respects

To speed up the pending was well as future arbitrations by providing for a time limit within which proceedings will have to be concluded which will be an improvement upon the UNCITRAL model

To rectify certain mistakes which have crept into some provisions of the Act

To provide for the establishment of a new Arbitration Division within each High Court where awards can be challenged under section 34,34A or 36

To provide for Fast Track Arbitration following a special procedure

2.

Section 9 (Interim measures by Court) to apply to international arbitration outside India; The UNCITRAL Model Law permits Art 9, which refers to interim measures by Court, to apply to international arbitration outside the country. The 1996 Act did not contain such a provision. This led to conflicting judgments. This omission is rectified, being a deviation from the UNCITRAL Model Law. Section 8, 27, 35 & 36 of the Act are also proposed to be applied to international arbitration outside India, as done under the Model Law. 3. Court to decide jurisdictional issues, if any, before making the reference, whenever in an action before it, the respondent relies upon an arbitration agreement. Section 8: Where a defendant/respondent relies on an arbitration clause before a judicial authority before making reference, jurisdictional issues may be decided: sec. 8(4) & (5): It is proposed to bring sec. 8 into conformity with the UNCITRAL Model law which enables the court to decide jurisdictional issues, if any, before making the reference, whenever in an action before it, the respondent relies upon an arbitration agreement.

The judicial authority may, where the respondent before it relies on an arbitration agreement, decide preliminary issues such as whether:

(i) (ii) (iii)

There is no dispute in existence The arbitration agreement or any clause thereof is null and void or in operative; agreement The arbitration is incapable of being performed

(iv)

The arbitration agreement is not in existence

But the Court shall not decide the issues if:(a) The relevant facts or documents are in dispute;

(b) There is need to adduce oral evidence; (c) The inquiry into these issues is likely to delay and reference to arbitration; (d) The request to decide these issues was belated;

(e) The decision on these issues is not likely to produce substantial savings in costs;or (f) There is no good reason as to why they should be decided.

Scope for duplication for arbitral tribunals eliminated sec. 8(3)

As it stands now, sec. 8(3) may lead to appointment of an arbitral tribunal by a party while an application for appointment made by another party is pending before the judicial authority. Thus in some cases, the Commission has noted that two sets of arbitrators have been appointed. It is proposed to eliminate such contingencies by adding a proviso below sec. 8(3).

The case before judicial authority whether be stayed, if reference is made section 8(2) The Act is silent on this issue. As in the English Act, 1996 it is proposed that once a reference is made, the case before the judicial authority shall remain stayed.

If arbitration clause is void etc., Scott vs. Avery clause shall not to operate sec 8(6):

Scott vs. Avery clause is one which states that, if there is an arbitration clause, no party can file an action in a court unless he first obtains an award. It is proposed that where the arbitration clause is declared void etc., the Scott vs. Avery clause will not apply. Appointment of Arbitrators to be on the Judicial side As at present, the Chief Justices and the Chief Justice of India or his nominees are making appointments of arbitrators and it has been held by the Supreme Court that this is done on the administrative side. There are greater advantages if the appointment is to be made on the judicial side. In fact, in the UNICTRAL Model Law, Art. 11 speaks on appointment by Court. Almost all countries which follow the Model Law, require the Court to make appointments, i.e., on the judicial side.

Once the appointment is not on administrative side, as proposed no writ will lie in the High Court .

4. Supreme Court and High Court may decide jurisdictional issues before making appointment of arbitrators under section 11

As under sec. 8, so under sec. 11, Supreme Court and High Court may decide jurisdictional issues: sec. 11(13) & (14)

It is proposed that as under sec. 8, the above courts may decide jurisdictional issues, before making appointment of arbitrators, but only @ if no oral evidence is necessary, @ all relevant documents are not in dispute, @ request is made without delay, @ inquiry into issues will not delay reference; and @ there will be substantial savings in costs of arbitration.

5. Place of arbitration shall be within India so far as all arbitrations under Part I of the Act are concerned
There appears to be a drafting mistake in sec. 20 in so far as it gives an impression that in the case of a purely domestic arbitration between Indian national/companies, the arbitration can be outside India. @ This impression is given by the words where the arbitration is in India appearing at the beginning of the section. @ Taking undue advantage of the mistake, some companies incorporated in India have been stipulating venues at London, even though the subject matter of contract or its performance is in India and there is no foreign element This drafting mistake was referred to by Dr. P.C. Rao in his Commentary. This is proposed to be rectified.

6. Time schedule for Pleadings, Evidence and arguments Time schedule for Pleadings (sec. 23), Evidence and arguments (sec. 24) proposed to be fixed by arbitrators for expediting arbitral process, subject to High Court rules to be made under sec. 82:

It is proposed that the words in sec. 23 and 24 which enable parties (or their counsel) to agree on time schedules be dropped but arbitrators would have to follow rules to be framed by the High Courts for expediting arbitrations. Chief examination could, under the proposals, be by way of affidavit High Court has to make rules for purposes of sec. 23 and sec. 24 as to :

(i)

Manner in which arbitral proceeding shall be conducted

(ii) Number of days for which the arbitration shall go on continuously on each occasion when the arbitral tribunal meets (iii) to sit (iv) Procedure under sec. 29A Number of hours on each day for which the tribunal has

7. Indian law alone to apply to purely domestic arbitrations between Indian nationals/companies.

Foreign law can apply only in case of an international arbitration in India Here too, there appears to be a drafting mistake in sec. 28 of the Act. The basic principle in all countries is that between the citizens of same country, the law of that country alone would apply for resolution of disputes. But unfortunately, the clause where the arbitration is in India is placed at the beginning of sec. 28(1) which sub section deals with disputes between Indian nationals/companies. The mistake in sec. 28, has enabled some companies to stipulate the place of arbitration as outside India and that a foreign law would apply.

This has given an impression that even between such parties there is an alternative situation where the arbitration can be outside India and therefore a foreign law could be applied. Hence sec. 28(1) is proposed to be amended by requiring only Indian law to be applied as between Indian nationals/companies in case of domestic arbitration.

8. Speeding up arbitral proceedings:New Section 29A and future arbitrations under the 1996 Act : One year under the Act, plus the time that may be agreed by parties (subject to a maximum of one year) and if the award is not passed within the said period, then the court to monitor future procedure before the arbitrators till the award is passed, subject to the rules to be made by the High Court under sec. 82: The 1996 Act omitted fixing a time limit for the reason that extension applications in courts under the 1940 Act were pending for months/years. But absence of time limit is creating other problems of delay. A new procedure is proposed to be prescribed under sec. 29A. The Act will now give one year and then parties can extend upto a maximum of one year. Then the arbitration proceedings get automatically suspended. But the moment an application is filed in court for extension, either by party or by the arbitral tribunal, the arbitral proceedings get revived even before any notice is issued in the application for extension. The Court (i.e. District Court or High Court, (original side) shall pass orders from time to time, fixing procedure and the dates etc. before the arbitrators, till award is passed, subject to the rules proposed to be made by the by the High Courts.

9 .Time fixed for completing pending arbitrations under the Act as well as under the 1940 Act

@ In the case of those arbitrations under 1996 Act which are pending for more than 3 years, the Act proposes to give one more year, then the proceedings get suspended.

@ On an application filed in court, they get revived.

@ The court will monitor arbitral proceedings in accordance with procedure proposed in sec. 29A, till the award is passed.

@ There is to be no stay at any stage, while granting extension of time.

@ In case 3 years have not passed by, such arbitrations under the 1996 Act are to be completed within the remaining time out of three years plus another six months. Thereafter the court will monitor as per sec. 29A.

Pending arbitrations under 1940 Act to be completed within one year (unless there is stay by any court), thereafter the court will monitor in accordance with procedure in sec. 29A:

10. Speeding up pending application to set aside award and appeals.

Pending applications for setting aside award under sec. 32 and appeals under sec. 37(1) of the 1996 Act to be disposed of within six months.

Appeals against interlocutory orders under sec. 37(2) to be disposed of within three months. 11. Two extra grounds are proposed, in applications under sec. 34 to set aside the award. Section 34A: In purely domestic arbitrations between Indian nationals/companies two extra grounds are proposed, in applications under sec. 34 to set aside the award.

They are: (i) Substantial question of law apparent on the face of the award provided it was raised before the arbitral tribunal and was referred to in the grounds.

(ii) Where reasons are not given in an award though under sec. 31(3) reasons are required to be given.

These grounds will not available in the case of international arbitration in India.

12. Mere filing of an application to set aside an award not to operate as a stay of the award. Under the existing provisions of sec. 36, the mere filing of an application to set aside an award operates as a stay of the award. @ This is proposed to be rectified by stating that, unless court grants stay, award will be enforceable. Section 36: Filing of application to set aside award no longer to amount to stay of award. Court may grant stay on conditions, taking into account the limited scope of interference under sec. 34, 34A

13. Fast Track Arbitration Chapter XI and sections 43A to 43D and Schedule IV It is proposed that, notwithstanding other terms to the contrary in the agreement, parties can agree for a single arbitrator. @ They can agree even where proceedings are court. pending in any

@ The arbitration is to be completed in six months. In case it is not over, the proceedings get suspended and get revived upon filing an application for extension in the High Court. @ The High Court will issue future dates and will monitor till the award is passed following the procedure in sec. 29A. @ There will be no stay by the High Court during the pendency of the application for extension.

It is proposed that all applications to set aside award to be filed in High Court only and not in District Court The High Court should dispose of the applications within three months of service of notice

14. Arbitration Division within each High Court to hear challenges under section 34,34A & 36 Arbitration Division in the High Court to deal with irrespective of pecuniary value with the following :(i) applications under sub-section (1) of section 34 to set aside awards (both new as well as pending); (ii) appeals to set aside awards under the 1940 Act (new as well as pending); (iii) enforcement of awards under the Act (new as well as pending);

(iv) execution of Awards under the 1940 Act (new and pending) Special Procedure for Enforcement of Foreign Awards through Arbitration Division of High Courts Sections 60A & 60B (Chapter III of Part II) The present procedure at two levels one on the subordinate courts or the High Court on the original side and another by way appeal to the High Court has been simplified and the proposed Arbitration Division will straight away deal with those cases. Arbitration Division will follow case management procedures for fixing time schedules etc