Introduction to Arbitration & Conciliation (Amendment) Bill,2015 &
In an attempt to make arbitration a preferred mode of settlement of commercial
disputes and making India a hub of international commercial arbitration, the
President of India on 23rd October 2015 promulgated an Ordinance ("Arbitration
and Conciliation (Amendment) Ordinance, 2015) amending the Arbitration and
Conciliation Act, 1996.
The Arbitration and Conciliation (Amendment) Bill, 2018 to further amend the
Arbitration and Conciliation Act, 1996 was approved on 7 March 2018 by Cabinet
of Ministers for introduction in ongoing session of the Parliament. These
amendments in the Act set to promote institutional arbitration in India and
further streamline the arbitration process by removing practical difficulties in
applicability of the first round of amendments made by the Arbitration and
Conciliation (Amendment) Act, 2015.
v Need for The Arbitration and Conciliation (Amendment) Bill, 2015?
Arbitration in India has been riddled with issues including excessive cost,
protracted proceedings leading to extensive delays. In order to remedy such
issues and create greater confidence in parties to choose India as a seat for
arbitration, the (Amendment) Act of 2015 was introduced, bringing into the realm
several significant changes in the Arbitration & Conciliation Act, 1996. A
noteworthy motive for it was to make arbitration a more preferred mode of
settlement of disputes by making it cost effective and providing a fixed time
period for disposal of disputes. Pitfalls of The Arbitration and Conciliation
(Amendment) Bill, 2015
The Amendment Act, 2015, however, failed to address certain issues including
importance of institutional arbitrations at a time when international
institutions such as ICC, LIAC, SIAC, HKIAC are playing key role in resolution
of disputes through arbitration.
Another drawback of the Amendment Act, 2015, which was creating legal hurdles,
was the question posed on its applicability to court proceedings initiated
pursuant to arbitrations invoked prior to 23.10.2015. Hence, a further amendment
was absolutely imperative to clear the obscurities created by the amendments
introduced in 2015.
In order to address above difficulties and issues, the cabinet has
introduced, "The Arbitration & Conciliation (Amendment) Bill, 2018"and has
approved the same. It is laudable that the laws of the Amendment Act, 2015 have
been noticed early on and are now being proposed to be rectified.
V The Arbitration And Conciliation (Amendment) Bill, 2015
The Arbitration and Conciliation (Amendment) Bill, 2015 was introduced in Lok
Sabha on December 3, 2015.
The Government of India has under its consideration proposals for making
Arbitration a preferred mode for settlement of commercial disputes by making it
more user-friendly and cost effective. This will lead to expeditious disposal of
cases. The Govt. of India is committed to improve its legal framework relating
to Arbitration. The Law Commission of India in its 246th Report has recommended
various amendments in the Arbitration and Conciliation Act, 1996, so that India
may become a hub of International Commercial Arbitration. The Law Commission has
also submitted a Supplementary to Report No. 246 on "Amendments to the
Arbitration Act, 1996 on ‘Public Policy’- Developments post Report 246", wherein
the Law Commission taking into account subsequent decisions of the Supreme Court
has recommended reformulation of amendment in Section 34(2)(b) of the Act.
v Salient features of the Amendment Act, 2015:
1.Applicability of certain provisions to international commercial
Part I of the Act that included provisions related to interim orders by a court,
order of the arbitral tribunal, appealable orders etc. only applied to matters
where the place of arbitration was India. Under the Bill, these provisions would
also apply to international commercial arbitrations even if the place of
arbitration is outside India. This would apply unless the parties agreed
The first and foremost welcome amendment introduced by the ordinance is with
respect to definition of expression 'Court'. The amended law makes a clear
distinction between an international commercial arbitration and domestic
arbitration with regard to the definition of 'Court'. In so far as domestic
arbitration is concerned, the definition of "Court" is the same as was in the
1996 Act, however, for the purpose of international commercial arbitration,
'Court' has been defined to mean only High Court of competent jurisdiction.
Accordingly, in an international commercial arbitration, as per the new law,
district court will have no jurisdiction and the parties can expect speedier and
efficacious determination of any issue directly by the High court which is
better equipped in terms of handling commercial disputes.
2.Amendment of Section 2(2):
A proviso to Section 2(2) has been added which envisages that subject to the
agreement to the contrary, Section 9 (interim measures), Section 27(taking of
evidence), and Section 37(1)(a), 37(3) shall also apply to international
commercial arbitrations, even if the seat of arbitration is outside India,
meaning thereby that the new law has tried to strike a kind of balance between
the situations created by the judgments of Bhatia International and Balco v.
Kaiser. Now Section 2(2) envisages that Part-I shall apply where the place of
arbitration is in India and that provisions of Sections 9, 27, 37(1) (a) and 37
(3) shall also apply to international commercial arbitration even if the seat of
arbitration is outside India unless parties to the arbitration agreement have
agreed to the contrary.
3.Amendment to Section 8: (Reference of parties to the dispute to
In Section 8, which mandates any judicial authority to refer the parties to
arbitration in respect of an action brought before it, which is subject matter
of arbitration agreement. The sub-section(1) has been amended envisaging that
notwithstanding any judgment, decree or order of the Supreme Court or any court,
the judicial authority shall refer the parties to the arbitration unless it
finds thatprima facieno valid arbitration agreement exists. A provision has
also been made enabling the party, who applies for reference of the matter to
arbitration, to apply to the Court for a direction of production of the
arbitration agreement or certified copy thereof in the event the parties
applying for reference of the disputes to arbitration is not in the possession
of the arbitration agreement and the opposite party has the same.
4.Amendment to Section 9 (Interim Measures):
The amended section envisages that if the Court passes an interim measure of
protection under the section before commencement of arbitral proceedings, then
the arbitral proceedings shall have to commence within a period of 90 days from
the date of such order or within such time as the Court may determine. Also,
that the Court shall not entertain any application under section 9 unless it
finds that circumstances exist which may not render the remedy under Section 17
The above amendments to Section 9 are certainly aimed at ensuring that parties
ultimately resort to arbitration process and get their disputes settled on merit
through arbitration. The exercise of power under Section 9 after constitution of
the tribunal has been made more onerous and the same can be exercised only in
circumstances where remedy under Section 17, appears to be non-efficacious to
the Court concerned.
5.Amendment to Section 11 (Appointment of Arbitrators):
In so far as section 11, "appointment of arbitrators" is concerned, the new law
makes it incumbent upon the Supreme Court or the High Court or person designated
by them to dispute of the application for appointment of arbitrators within 60
days from the date of service of notice on the opposite party.
As per the new Act, the expression 'Chief Justice of India' and 'Chief Justice
of High Court' used in earlier provision have been replaced with Supreme Court
or as the case may be, High Court, respectively. The decision made by the
Supreme Court or the High Court or person designated by them have been made
final and only an appeal to Supreme Court by way of Special Leave Petition can
lie from such an order for appointment of arbitrator. The new law also attempts
to fix limits on the fee payable to the arbitrator and empowers the high court
to frame such rule as may be necessary considering the rates specified in Fourth
6.Amendment to Section 12 (Grounds for Challenge):
Amendment to Section 12, as per the new law makes the declaration on the part of
the arbitration about his independence and impartiality more onerous. A Schedule
has been inserted (Fifth Schedule) which lists the grounds that would give rise
to justifiable doubt to independence and impartiality of arbitrator and the
circumstances given in Fifth Schedule are very exhaustive. Any person not
falling under any of the grounds mentioned in the Fifth Schedule is likely to be
independent and impartial in all respects. Also, another schedule (seventh
schedule) is added and a provision has been inserted that notwithstanding any
prior agreement of the parties, if the arbitrator's relationship with the
parties or the counsel or the subject matter of dispute falls in any of the
categories mentioned in the seventh schedule, it would act as an ineligibility
to act as an arbitrator. However, subsequent to disputes having arisen, parties
may by expressly entering into a written agreement waive the applicability of
this provision. In view of this, it would not be possible for Government bodies
to appoint their employees or consultants as arbitrators in arbitrations
concerning the said Government bodies.
7.Amendment to Section 14 (Failure or Impossibility to Act):
Amendment of Section 14 aimed at filling a gap in the earlier provision, which
only provided for termination of mandate of the arbitrator. If any of the
eventualities mentioned in sub-section (1) arises. The new law also provides for
termination of mandate of arbitration and substitution and his/her substitution
by another one.
8.Amendment to Section 17 (Interim Measures by Arbitral tribunal):
The old Act had lacunae where the interim orders of the tribunal were not
enforceable. The Amendment removes that lacunae and stipulates that an arbitral
tribunal under Section 17 of the Act shall have the same powers that are
available to a court under Section 9 and that the interim order passed by an
arbitral tribunal would be enforceable as if it is an order of a court. The new
amendment also clarifies that if an arbitral tribunal is constituted, the Courts
should not entertain applications under Section 9 barring exceptional
9.Amendment to Section 23 (Statement of claim & Defence):
The new law empowers the Respondent in the proceedings to submit counter claim
or plead a set-off and hence falling within the scope of arbitration agreement.
10.Amendment to Section 24 (Hearings & Written Proceedings):
It requires the arbitral tribunal to hold the hearing for presentation of
evidence or oral arguments on day to day basis, and mandates the tribunal not to
grant any adjournments unless sufficient causes shown. It further empowers the
tribunal the tribunal to impose exemplary cost where adjournment
11.Insertions of new Section 29A and 29B (Time limit for arbitral award and
Fast Track Procedure):
To address the criticism that the arbitration regime in India is a long drawn
process defying the very existence of the arbitration act, the Amended Act
envisages to provide for time bound arbitrations. Under the amended act, an
award shall be made by the arbitral tribunal within 12 months from the date it
enters upon reference. This period can be extended to a further period of
maximum 6 months by the consent of the parties, after which the mandate of the
arbitrator shall terminate, unless the Court extends it for sufficient cause or
on such other terms it may deem fit. Also, while extending the said period, the
Court may order reduction of fees of arbitrator by upto 5% for each month such
delay for reasons attributable to the arbitrator. Also, the application for
extension of time shall be disposed of by Court within 60 days from the date of
notice to the opposite party.
The Ordinance also provides that the parties at any stage of arbitral proceeding
may opt for a fast track procedure for settlement of dispute, where the tribunal
shall have to make an award within a period of 6 months. The tribunal shall
decide the dispute on the basis of written pleadings, documents and submissions
filed by the parties without oral hearing, unless the parties request for or if
the tribunal considers it necessary for clarifying certain issues. Where the
tribunal decides the dispute within 6 months, provided additional fees can be
paid to the arbitrator with the consent of the parties.
12.Amendment to Section 25 (Default of a Party):
The new Act empowers the tribunal to treat Respondent's failure to communicate
his statement of defence as forfeiture of his right to file such statement of
defense. However, the tribunal will continue the proceedings without treating
such failure as admission of the allegations made by the Claimant.
13.Amendment to section 28 (Rules Applicable to Substance of dispute):
The new law requires the tribunal to take into account the terms of contract and
trade usages applicable to the transaction. In the earlier law, the arbitral
tribunal was mandated to decide disputes in accordance with the terms of the
contract and to take into account the trade usages applicable to the
transaction. To that extent, the new law seeks to relieve the arbitrators from
strictly adhering to the terms of the contract while deciding the case. However,
the arbitrator can still not ignore the terms of the contract. Therefore, the
new amendment seems to bring in an element of discretion in favour of the
arbitrators while making of an award.
14.Amendment to Section 31(Form & Contents of Arbitral Award):
This provides for levy of future interest in the absence of any decision of the
arbitrator, on the awarded amount @2% higher than current rate of interest
prevalent on the date of award. The current rate of interest has been assigned
the same meaning as assigned to the expression under Clause (b) of Section 2of
the Interest Act, 1978.
In addition, the new Act lays down detailed parameters for deciding cost,
besides providing that an agreement between the parties, that the whole or part
of the cost of arbitration is to be paid by the party shall be effective only if
such an agreement is made after the dispute in question had arisen. Therefore, a
generic clause in the agreement stating that cost shall be shared by the parties
equally, will not inhibit the tribunal from passing the decision as to costs and
making one of the parties to the proceedings to bear whole or as a part of such
cost, as may be decided by the tribunal.
15.Amendment of Section 34 (Limiting the gamut of Public Policy of India):
As per the new amendment, an award passed in an international arbitration, can
only be set aside on the ground that it is against the public policy of India
if, and only if, – (i) the award is vitiated by fraud or corruption; (ii) it is
in contravention with the fundamental policy of Indian law; (iii) it is in
conflict with basic notions of morality and justice. The present amendment has
clarified that the additional ground of "patently illegality" to challenge an
award can only be taken for domestic arbitrations and not international
arbitrations. Further, the amendment provides that the domestic awards can be
challenged on the ground of patent illegality on the face of the award but the
award shall not be set aside merely on the ground of an erroneous application of
law or by re-appreciation of evidence. The new Act also provides that an
application for setting aside of an award can be filed only after issuing prior
notice to the other party. The party filing the application has to file an
affidavit along with the application endorsing compliance with the requirement
of service of prior notice on the other party. A time limit of one year from the
date of service of the advance notice on the other parties has been fixed for
disposal of the application under Section 34. Significantly, there is no
provision in the new Act which empowers the court or the parties to extend the
aforesaid limit of one year for disposal of the application under Section 34.
16.Amendment to Section 36 (Stay on enforcement of award):
The Ordinance provides that an award would not be stayed automatically by merely
filing an application for setting aside the award under Section 34. There has to
be a specific order from the Court staying the execution of award on an
application made for the said purpose by one of the parties. The Ordinance aims
to remove the lacunae that existed in the previous Act where pending an
application under Section 34 for setting aside of arbitral award, there was an
automatic stay on the operation of the award. The new law also empowers the
Court to grant stay on operation of arbitral award for payment of money subject
to condition of deposit of whole or a part of the awarded amount.
17.Amendment to Section 37 (Appealable Orders):
Under Section 37(1), the new law makes provision for filing of an appeal against
an order of judicial authority refusing to refer the parties to arbitration
under Section 8. As regards enforcement of certain foreign awards, the new law
seeks to add explanation of Sections 48 and 57 thereby clarifying as to when an
award shall be considered to be in conflict within public policy of India. The
parameters are the same as are provided under Section 34. Similarly, the
expression "Court" used in Sections 47 and 56 have been defined to mean only the
High Court of competent jurisdiction.
The amendment brought to the 1996 Act is certainly a positive step towards
making arbitration expeditious, efficacious and a cost effective remedy. The new
amendments seek to curb the practices leading to wastage of time and making the
arbitration process prohibitively a costly affair. The new law also makes the
declaration by the arbitrator about his independence and impartiality more
realistic as compared to a bare formality under the previous regime. Making the
arbitrator responsible for delay in the arbitration proceedings, for the reasons
attributable to him, would ensure that the arbitrators do not take up
arbitrations, which are beyond their capacities. Such a deterrent would imbibe
self-discipline and control amongst the arbitrators. It can be said that the
present amendments certainly travel an extra mile towards reducing the
interference of the Court in arbitration proceedings that has been a consistent
effort of the legislature since passing of the 1996 Act.
v Further Amendments submitted by (High Level Committee) to the Amendment
The Arbitration and Conciliation Act, 1996, was amended by the Arbitration and
Conciliation (Amendment) Act, 2015 in order to make arbitration process user
friendly, cost effective and ensure speedy disposal and neutrality of
arbitrators. However, to give a boost to institutional, arbitration vis-a-visad
hocarbitration and to remove some practical difficulties in applicability of
the Arbitration and Conciliation (Amendment) Act, 2015, a High Level Committee (HLC)
under the Chairmanship of Justice B. H. Srikrishna, Retired Judge, Supreme Court
of India, was constituted by the Central Government, The HLC was given the
# to examine the effectiveness of existing arbitration mechanism by studying
the functioning and performance of Arbitral Institutions in India;
# to devise a road map to promote institutionalized arbitration mechanisms in
# to evolve an effective and efficient arbitration eco-system for commercial
dispute resolution and submit a Report on suggested reforms in the statute.
The HLC submitted its Report on 30thJuly, 2017 and has recommended for
amendments in the Arbitration and Conciliation Act, 1996. The proposed
amendments are as per the recommendations of the High Level Committee.
V The Arbitration And Conciliation (Amendment) Bill, 2018
The Arbitration and Conciliation (Amendment) Bill, 2018 amendments which, when
passed will apply to the Arbitration and Conciliation Act, 1996 are pursuant to
the Srikrishna Committee Report released in July, 2017, recommending further
amendments on the back of the 2015 amendments, primarily to improve on or
clarify various provisions.
At the very outset, the proposed Bill clarifies that the objective of the
amendments is to promote institutional arbitration by creating an independent,
statutory body to govern the entire process of Arbitration in India right from
the stage of appointment of arbitrator. It further proposes to create a robust
eco system for commercial arbitration to flourish and thrive in India.
Primarily, following are the amendments proposed by the aforesaid Bill:
1.Establishment of a statutory body called Arbitration Council of India "ACI",for
promoting institutional arbitrations;
2.Amendment in Section 29A of the Act;
3.Introduction of Section 42A & 42B;
4.Introduction of Section 87;
5.Amendment in Section 11 of the Act
# Arbitration Council of India
The above amendments are quite significant as the same cater to the practical
difficulties being faced by the parties as well as the arbitrators.
"Most significantly, the Bill suggests the creation of a separate, independent,
statutory body called the Arbitration Council of India ("ACI") to be presided
over by a Judge of the Supreme Court or Chief Justice or Judge of any High Court
or any other eminent person, which would include an eminent academician etc. and
other government nominees as well".This Council will frame norms for alternate
dispute resolution and evolve professional guidelines. This is a positive step
to ensure the quality of arbitral institutions. The Council will also maintain
an electronic depository of arbitral awards that can be used to analyse how the
jurisprudence has evolved.
Role of Act:-
It includes grading arbitral institution and accrediting arbitrators by laying
down certain rules and norms and to promote and encourage arbitration and other
ADR Mechanisms. For the aforesaid purpose, ACI is to formulate appropriate
policy and guidelines for the establishment, operation and maintenance of
uniform professional standards in respect of all matters relating to arbitration
and ADR mechanism. In this regard, the ACI’s role may further expand to
facilitate the speedy appointment of arbitrators through designated arbitral
institutions by the Supreme Court or the High Court.
v Length of the Arbitral Proceeding
For instance, the Amendment Act, 2015 introduces a time limit of 12 months for
conclusion of arbitral proceedings including making the award, from the date
when an arbitrator enters into reference. The aforesaid period is found to be
too less as subsequent to an arbitrator entering into reference, completion of
pleadings consumes substantial period. This makes it practically impossible for
an arbitrator to record evidence, wherever necessary, hear arguments and make
the award within 12 months only. In majority of the cases especially those
involving complex issues and where number of claims are high, parties are
required to approach the Court for extending the time for making the award.
To overcome these obstacles,
"The Amendment Bill, 2018, introduces anamendment in Section 29A, thereby
suggesting that 12 month period shall begin to run from the date when pleadings
are complete. The Bill further suggests to exclude International Arbitration
from the restricted timeline of making the arbitral award".
Statutory recognition of confidentiality in arbitration has been suggested (the
Act mandates confidentiality only for conciliation proceedings). However, the
Amendment Bill, 2018 proposes to introduce a new section 42A, requiring
arbitrators and arbitral institution to keep proceedings confidential (except
the award). This provision will have to be carefully drafted to exclude any
order or award that may be challenged in a court including Section 17 orders.
Importantly, the Act did not contain any express provision regarding
confidentiality of the proceedings and the Amendment Act, 2015was also silent
on the issue.
The Amendment Bill, 2018 also provides for a new Section 42Bwhich aims to
protect the Arbitrator or arbitral tribunal from being dragged into unnecessary
legal proceedings by the parties for any action or omission done in good faith.
This will afford comfort to the arbitrators & ensure that the arbitrator is able
to exercise her function without any fear of proceedings ensuing therefrom.
Arbitrator immunity provisions are present in many foreign statutes and
international institutional rules, and MCIA Rules.
# Section 87
One of the major legal hurdles faced while implementing theAmendment Act,
2015was regarding the applicability of the same to court proceedings arising
out of arbitrations, invoked prior to the amended Act coming into force.
In other words,
One of the most contentious issues in recent times has been the correct
interpretation of Section 26 of the Amendment Act and whether the amendments
apply to court proceedings:
(i) filed after the amendments came into force in 2015, but in respect of
arbitrations commenced before the amendments;
(ii) court proceedings which were pending at the time the amendments came
into effect but were decided thereafter. In this context there were conflicting
decisions of various courts.
Application of the 2015 Amendments post 2018 Amendment Bill
In order to address this issue, a new Section 87 has been proposed in the
Amendment Bill, 2018 to clarify that unless parties agree otherwise
theAmendment Act, 2015shall not apply to the following:
# arbitral proceedings that have commenced prior to the Amendment Act, 2015
coming into force i.e. prior to 23.10.2015.
# court proceedings arising out of or in relation to such arbitral proceedings
irrespective of whether such court proceedings are commenced prior to or after
the commencement of the Amendment Act, 2015
# The Supreme Court recently passed a judgment in the matter of:
Kochi Cricket Pvt. Ltd. And Etc.
It ruled that the 2015 amendments would apply to all court proceedings filed
after the amendments came into effect (October 23, 2015), regardless of when the
arbitration was commenced.
"Crucially, it was also held that the 2015 amendments would apply to pending
proceedings that may have been filed prior to the amendments but were pending at
the time amendments came into force."
The 2018 amendments however provide that the 2015 amendments will apply only to
proceedings actually filed after October 23, 2015.
Being so, the Supreme Court has directed that its aforesaid judgment be
transmitted to the Law Ministry and the Attorney General to take note of its
# Analysis of the Judgement
The judgment itself raises questions. Assuming a petition were filed to
challenge an award prior to the 2015 amendments but was pending on the date of
the amendments, by virtue of the judgment, an automatic stay that was earlier
effective would no longer apply. It would then be open to the award-creditor to
apply for enforcement and the award-debtor would have to file a separate
application for a stay (in which case a deposit of the award amount would be
probable), thus taking away a benefit that a party had prior to the 2015
It remains to be seen whether the Government takes note of the Supreme Court’s
interpretation and effects amendments in consonance.
The amendments are a welcome development in the field of arbitration and when
implemented will assist further in India being seen as an arbitration friendly
Appointment of Arbitrators
Section 11will be amended so that instead of having to go through court for
appointment of an arbitrator, the Supreme / High Court may designate specific
arbitral institutions that will make the relevant appointments. This obviates
the need to file a formal application for appointment in court, thus speeding up
the process by taking away some part of the burden from the court.
The Report had recommended that such appointments should be made without the
requirement of the Supreme Court or High Courts determining the existence of an
arbitration agreement. This is in line with the kompetence-kompetence principle
of an arbitral tribunal itself determining its own jurisdiction.
On a related note, the present Section 11 (6A) of the 2015 Act mandates that the
Court in a Section 11 proceeding should confine its examination to the existence
of the arbitration agreement. Prior to its amendment, the power under Section 11
was held to be wider in scope and included an examination of whether claims
could be referred to arbitration etc. The Cabinet’s press release does not deal
with this aspect in its recommendation.
While the proposed bill appears to fill in some lacunae created by the recent
amendment, the extent of it successfully plugging all the loopholes is still
debatable. It is germane to point out the practical difficulties and challenges
that are faced by parties and lawyers with regard to the law governing
arbitration in India. Some of these seem to be overlooked by lawmakers and
require consideration by them, which more often than not, is a protracted
process. The following are some of the loopholes, still left for debate in
1.With respect to the introduction of the ACI, it would be crucial for the
Amendment to clearly define the scope of the ACI’s role and its powers.
2.Pertinently, the question arises whether in view of establishment of an
institution like ACI, for securing speedy appointment of the arbitrators,
Section 11 of the Act becomes redundant. Further, where a party is objecting to
the validity of the arbitration agreement itself, what is the course of action
to be adopted in such circumstances.
3.Further, the Amendment Bill, 2018 could have provided clarification on the
issue, whether two Indian parties can agree for a foreign seated arbitration,
despite being bound by the Indian Law.
4.Similarly, with regards to the section containing confidentiality, it is
not clear whether the confidentiality remains even when the proceedings have
progressed to the Court under Section 34 of the Act and the Court requisitions
the arbitral record.
Thus, while the Amendment Bill, 2018 proposes many welcome changes, there are
still certain grey areas, which are required to be addressed by the legislature
before the Act can be said to be complete and all-encompassing legislation. It
is quite possible that some of the issues highlighted by us have been addressed
in the text of the Bill, which is presently not available.
AIR 2018 SC 1549