Recent Amendments in Arbitration and Conciliation Act, 1996

 · 3 mins read

With the main objective of making India a hub for national and international arbitration and to enable faster resolution of commercial disputes, yet again in 2019 amendment was brought in the Arbitration and Conciliation Act, 1996, which instead of fulfilling its desired objectives paved way for criticisms. The amendment introduced eighth schedule under Section 43J which sets out the qualifications and expertise of arbitrators and says only those lawyers who fulfill the given criteria can act as an arbitrator.

Additionally section 1(c )(a) was inserted to define arbitral institution to mean an institution designed by the Supreme Court or High Court under the Act.

The Indian Arbitration system has always been subject to certain criticisms and it is the need of the hour to legislate a proper law in-order to strengthen the arbitration in India. The 2019 amendment aims to make India a leading arbitration seat; however the ambiguities posed are likely to leave an adverse affect on the country’s arbitration. As rightly stated by some of the imminent legal jurists, this amendment also takes two steps forward and five steps backwards. Excluding the foreign arbitrators limit the skill set available to the parties, as Indian arbitrators alone might not have the requisite expertise. Thus, it can be rightly stated that schedule eighth is likely to increase litigation in courts and weakens the India- seated international commercial arbitrations instead of strengthening it.

Then came the Arbitration and Conciliation (Amendment) Act, 2021 which was passed on March 10, 2021, and will come into operations from November 04, 2020 thereby replacing the Arbitration and Conciliation (Ordinance), 2020.

An explanation to Section 34(2)(b) of Arbitration and Conciliation Act, 1996, says that an ward can be set aside if it is induced by fraud or corruption i.e., against public policy. The parties can approach the courts to stay the award on the grounds mentioned in section 34 i.e., proof of invalidity of arbitral agreement. However, the award does not become automatically unenforceable as per section 36(2). The amendment Act changed this provision and inserted section 36(3) that says that if the court is satisfied that there is a prima facie case:

• The arbitration agreement or contract which is the basis of the award,
• The making of the award was induced by fraud or corruption,

It shall unconditionally stay the award unless the court has disposed the challenge of award.1
However there is a concern over misuse of such a provision.

In A. Ayyasamy v. A. Paramasivan,2 the Supreme Court distinguished between ‘fraud simpliciter’ and ‘serious allegations of fraud’ and that only the latter will fall outside the scope of arbitral tribunal.

According to Schedule 8, Section 43J “no person can be appointed as an arbitrator unless such person is an advocate within the meaning of Advocates Act, 1961” and it also says that such person should have minimum 10 years of experience. The eighth schedule has provided an exhaustive list of qualifications for the arbitrators. Thereby, the 2021 amendment replaced the provision and laid down that “The qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations”.

To conclude, even though several attempts are made to make the arbitration and Conciliation Act stronger in the country, it appears to go backwards in addressing few complex matters. And also repeated amendments are likely to cause confusion and chaos in settling the disputes. When arbitration and conciliation are considered to be efficient, less technical and less time consuming alternative to court process then the law administering it also should be simple yet effective.

  1. Ashmia Obhan and Nishitha Jaisingh, The Arbitration and Conciliation Amendment Act, 2021, MONDAQ (September 28, 2021, 5: 03 PM),
  2. C.A. no. 8245-8246 OF 2016.