Analysis of The Arbitration and Conciliant Act 1996 in India

The Arbitration and Conciliation Act, 1996 was enacted by the Parliament of India, to consolidate and amend the jurisprudence associating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitrational awards in conformity with the guidelines of the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law ‘ ( UNCITRAL Model Law ) which was designed to hold a universally unvarying jurisprudence for arbitrational processs. The principle for the passage of the 1996 Act was “ to understate the supervisory function of tribunals in the arbitrational procedure ” [ 1 ] . This is clearly apparent from an analysis of the commissariats of Sec 5 of the 1996 Act which curtails the extent of judicial intercession to countries mentioned in the Act itself [ 2 ] .

However, with March of clip, the bench in India has tried to restrict the growing of arbitration in India as an efficacious alternate difference declaration mechanism and has expanded the extent of judicial intercession in arbitrational proceeding through a figure of advanced determinations and with a certain grade of judicial jurisprudence devising in this respect in recent times. This has accordingly affected the chief aim of the Act in minimising the function of the tribunals in the arbitration procedure. ‘ Such an mentality of the bench and particularly that of the higher bench like the High Courts and the Supreme Court of India, has led to a state of affairs where an arbitrational tribunal maps merely like any other low-level tribunal whose determinations are on a regular basis appealed against [ 3 ] .

Therefore the experiences of the working Arbitration and Conciliation Act, 1996 have shown that “The Arbitration Act which was supposed to be alternate, inexpensive and expeditious is neither inexpensive nor expeditious nor alternate, as finally every award lands up being challenged in tribunal. Arbitration is now maligned, dreaded and hated by the litigators who are forced into it. Reasons for the same are multiplex and everyone concerned with this system is to be blamed” [ 4 ] . Now scholars and practicians in jurisprudence of arbitration, within and outside of India, complain that, in-spite of Parliament’s purpose to guarantee independency and non-interference in the arbitrational proceedings, judicial intercession and holds have resulted in unpredictable consequences and defeat in the arbitration procedure in India and hence, the critics justly province that, parties prefer to intercede outside the state or take judicial proceeding in Indian tribunals [ 5 ] .

In order to make off with the lacks and blanks of the Arbitration and Conciliation Act, 1996, the parliament of India took necessary stairss to amend the said Act, harmonizing to the demands of altering times [ 6 ] , The Law Commission of India in its 176Thursdaystudy which was based on the bill of exchange Arbitration and Conciliation ( Amendment ) Bill, 2001, gave its recommendations [ 7 ] for pronouncing important alterations in the said Arbitration Act, 1996. The authorities of India after taking into consideration recommendation of the Law Commission of India as contained in its 176ThursdayReport prepared the Arbitration and Conciliation ( Amendment ) Bill, 2003. But the said Bill was withdrawn from Rajya Sabha, as sentiment was expressed that the commissariats of the measure gave room for inordinate intercession by the tribunals in arbitration proceedings and farther, many of the commissariats of the said measure were controversial. In 2004, the authorities of India appointed Justice Saraf commission to give its recommendation for amending the Arbitration Act, 1996 and the said commission submitted its recommendations to the authorities of India in 2005. Establishing on the 176th study of The Law Commission of India every bit good as the recommendations of Justice Saraf commission made in 2005, the Ministry of Law and Justice has proposed some important alterations in the 1996 Act with the purpose of reenforcing the ‘minimal judicial intercession ‘ criterion and to unclutter the confusion created by some advanced judicial readings of the 1996 Act [ 8 ] and released on April 9, 2010 a Consultation Paper [ 9 ] , incorporating some proposed amendments to the said Arbitration Act, 1996. The principle for the proposed amendments has been summed up as follows: “ Further, in some instances, tribunals have interpreted the commissariats of the Act in such a manner which defeats the chief object of such statute law. Therefore, it becomes necessary to take the troubles and lacunae’s in the Act so that the ADR method may go more popular and object of ordaining Arbitration jurisprudence may be achieved [ 10 ] . ”

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A CONSULTATION PAPER ON PROPOSED AMENDMENTS TO THE ARBITRATION AND CONCILIATION ACT, 1996 REALESED BY MINISTRY OF LAW AND JUSTICE GOVERNMENT OF INDIA:

In April, 2010, the Ministry of Law and Justice came up with the Consultation Paper incorporating a figure of proposed amendments [ 11 ] to be made in the Arbitration Act, 1996. The Consultation Paper aimed at remotion of the defects noticed in the organic structure of the said Act every bit good as to put right the erroneous readings made by the tribunals, which had the consequence of get the better ofing the aims of the Act. About 10 wide proposals have been made in the Consultation Paper seeking to rectify several jobs such as pertinence of Part-I to outside arbitrations, absence of robust institutionalized arbitration, absence of specialized commercial benches to cover with arbitration affairs, lucidity on fortunes that are likely to give rise to justifiable uncertainties about the independency or nonpartisanship of the proposed arbiter, high default involvement rate, expansive impression of public policy, etc. The eventful alterations on the Arbitration & A ; conciliation Act, 1996, based on the proposed amendments will convey in alterations to Sections 2 ( 1 ) ( vitamin E ) , 2 ( 2 ) , 11, 12 ( 1 ) , 28 ( 3 ) , 31 ( 7 ) ( B ) , 34 ( 2 ) ( B ) and Explanation and 36. It would besides infix a new Sec. 34A [ 12 ] .

The proposed alterations besides empower the Cardinal Government to order by regulations guidelines on struggle of involvement on the lines of IBA guidelines for Sec. 12 ( 1 ) . The consequence of “Commercial Division of High Courts Bill, 2009” will besides convey in eventful alterations in the Act. The interpolation of proviso for implied arbitration understanding in commercial contract of high consideration value will convey in alterations for Sections 2 ( 1 ) ( B ) , 7 and 8 [ 13 ] .

The proposed amendments are extremely desirable and will assist to surge over assorted conflicting determinations rendered on the reading of some of the commissariats of the Act by assorted High Courts and the Apex Court. The proposed alterations will besides advance institutional arbitration, which is extremely necessary to better professionalism and efficiency in the arbitration system. The proposed alterations will besides assist to acquire over the unfavorable judgment that “arbitration is one thing in India and another for the remainder of the world” [ 14 ] .

CRITICAL VIEW OF PROPOSED AMENDMENTS:

Although the Consultation Paper released by the Ministry of Law and Justice is a singular effort towards taking the lacks noticed in the working of the Arbitration Act, 1996, but all of the proposed amendments as narrated in the audience paper are non equal plenty to run into the challenges faced by the legal government in the field of Indian arbitration and may non be able to successfully carry through the aim of the 1996 Act to advance a pro-arbitration legal government with minimum judicial intercession [ 15 ] .

( A ) Application of Part I – Section 2 ( 2 ) :

In the audience paper [ 16 ] , it is proposed to amend Section 2 ( 2 ) of the Arbitration and Conciliation Act, 1996 as follows:

“ ( 2 ) This portion shall use merely where the topographic point of arbitration is in India. Provided that commissariats of Sections 9 and 27 shall besides use to international commercial arbitration where the topographic point of arbitration is non in India if an award made in such topographic point is enforceable and recognized under Part II of this Act [ 17 ] .”

From an analysis of the above proposal of the Ministry of Law and Justice to amend Sec 2 ( 2 ) of the 1996 Act goes to demo that the said amendment can be effectual [ 18 ] in bring arounding the ambiguity associating to the international commercial arbitration in the pertinence of Part I of the 1996 Act to international commercial arbitrations, steaming out of the determination of the supreme tribunal of India in Bhatia International [ 19 ] and its miss-interpretation in Venture Global [ 20 ] . Further, the uncertainty expressed associating to a foreign award being rendered meaningless in instance interim/conservative alleviations are non provided are besides taken attention of by the proposed provision to Sec 2 ( 2 ) , by rendering the determination in Venture Global uneffective [ 21 ] . The proposed amendment can besides justly restrict inordinate intercession by the tribunals in international commercial arbitrations held outside India. It is submitted here that, in order to render the impact of the determination in Venture Global wholly in-effective, a provision should be added to Sec 34 keeping the tribunals from entertaining any application under Sec 34 which seeks to assault an award rendered in an international commercial arbitration held outside India [ 22 ] .

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( B ) Amendment in Section 11:

It is proposed that Section 11 of the Arbitration and Conciliation Act, 1996 may be amended [ 23 ] to the limited extent as follows:

( a ) In sub-Section ( 4 ) in clause ( B ) for the words, ‘by the Chief Justice or any individual or establishment designated by him” the words “by the High Court or any individual or establishment designated by it” shall be substituted [ 24 ] .

( B ) In sub-Section ( 5 ) for the words, “by the Chief Justice or any individual or establishment designated by him” the words “by the High Court or any individual or establishment designated by it” shall be substituted.

( degree Celsius ) In sub-Section ( 6 ) for the words, “by the Chief Justice or any individual or establishment designated by him” the words “by the High Court or any individual or establishment designated by it” shall be substituted.

( vitamin D ) For sub-section ( 7 ) , following sub-section shall be substituted viz. : – “A determination on a affair entrusted by sub-section ( 4 ) or sub-section ( 5 ) or sub-section ( 6 ) to the High Court or the individual or establishment designated by it shall be concluding and no entreaty including a missive patent entreaty shall lie against such determination [ 25 ] .”

( vitamin E ) In sub-Section ( 8 ) for the words, “by the Chief Justice or any individual or establishment designated by him” the words “by the High Court or any individual or establishment designated by it” shall be substituted.

( degree Fahrenheit ) In sub-Section ( 9 ) for the words, “the Chief Justice of India or any individual or establishment designated by him” the words “the Supreme Court or any individual or establishment designated by it” shall be substituted.

( g ) In sub-section ( 10 ) for the words, “The Chief Justice” , the words, “High Court” shall be substituted.

( H ) In sub-Section ( 11 ) , for the words, “the Chief Justice of different High Courts or their designates, the Chief Justice or his designate to whom the petition has been foremost made under the relevant sub-section shall entirely be” , the words, “different High Courts or their designates, the High Court or its designate to which the petition has been foremost made under the relevant subdivision shall entirely be” shall be substituted [ 26 ] .

( I ) For sub-section ( 12 ) following sub-section shall be substituted, viz. : – “12 ( a ) Where the affairs referred to in sub-sections ( 4 ) , ( 5 ) , ( 6 ) , ( 7 ) , ( 8 ) and ( 10 ) arise in an international commercial arbitration, the mention to “High Court” in those sub-sections shall be construed as a mention to the “Supreme Court” .

( B ) Where the affairs referred to in sub-sections ( 4 ) , ( 5 ) , ( 6 ) , ( 7 ) , ( 8 ) and ( 10 ) arise in any other arbitration, the mention to “High Court” in those sub-sections shall be construed as a mention to the “High Court” within whose local limits the chief civil tribunal referred in clause ( vitamin E ) of sub-Section ( 1 ) of Section 2 is situate and, where the High Court itself is the Court referred to in that clause, to that High Court.”

( J ) After sub-section ( 12 ) , following sub-sections shall be inserted, viz. : – “ ( 13 ) Notwithstanding anything contained in predating commissariats in this Sections, where an application under this Section is made to the Supreme Court or High Court as the instance may be for assignment of arbiter in regard of ‘Commercial Dispute of specified value’ , the Supreme Court or the High Court or their designate, as the instance may be shall authorise any arbitration establishment to do assignment for the arbiter [ 27 ] .

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Explanation: – For the intent of this sub-section, look “Commercial Dispute” and “specified value” shall hold same significance assigned to them in the Commercial Division of High Court Act, 2009.”

“ ( 14 ) An application made under this Section for assignment of arbiter shall be disposed of by the Supreme Court or the High Court or their designate, as the instance may be every bit efficiently as possible and endeavour shall be made to dispose of the affair within 60 yearss from the day of the month of service of notice on the opposite party [ 28 ] .”

An analysis of the above proposed amendment of Sec 11 of the Arbitration Act, 1996 goes to demo that, the said amendment seeks to travel off from the determination of the Supreme Court in Patel Engineering [ 29 ] and emphasises the importance of advancing institutional arbitration [ 30 ] in India. Further, the proposed amendments are soundless on the whether the nature of the order made under Sec 11 is judicial or administrative, which is the cardinal issue or the focal point created by determination in Patel Engineering. Therefore, rule of jurisprudence as enumerated in Patel Engineering continues to keep every bit good jurisprudence and an entreaty under Article 136 of the Constitution would still lie thereby detaining the fundamental law of the tribunal [ 31 ] . Further, the proposed amendment is besides soundless associating to the mechanism of examination permitted under Sec 11 proceeding and accordingly it can do considerable hold in the fundamental law of the court. It can besides impact the virtues of the difference before the arbitrational court. Besides this the proposal for a compulsory mandate to arbitrational establishments in instances of merely high value contracts is besides debatable as this would make a double system of assignment and may take to development of parallel law associating to assignment of arbiters. Although, the said proviso makes a mention to the Commercial Division of High Courts Bill, 2009, it has non been yet passed by the parliament [ 32 ] .

The proposed amendment to Sec.11 of the Act, for the intent of advancing institutional arbitration is extremely desirable as it will supply the much needed expertness for declaration of arbitrational differences and can efficaciously look into un-necessary hold in such proceeding, it is suggested here that, for the intent of beef uping institutional arbitration in India, Sec.11 needs farther amendment with the proviso to mention all affairs to a recognised arbitrational establishment for the assignment of arbiters, and non restricting it to the referral instances affecting affairs of high commercial value. As a consequence of such amendment of Sec.11, the tribunals will play a supervisory function to supervise to which arbitrational establishment the parties should near for the assignment of the tribunal [ 33 ] .

The added benefits of the proposed amendment Sec.11 is that, it will guarantee that, a specialized arbitrational establishment trades with such affairs on a regular footing, would assist in the assignment of right people in the fundamental law of the tribunal, constituting of both proficient and legal experts who are suited to decide differences accurately. Further, the order made by the tribunal directing to near the appropriate arbitrational establishment will non give rise to annoying entreaties, as it is non a capable affair of challenge under Sec. 136 of the Act due to ground that it is an administrative order and non a judicial order. Party who got dissatisfied with the assignment procedure can dispute it before the tribunal hearing the difference and is non deprived of right of entreaty under Sec. 37 of the Act against the order of the tribunal [ 34 ] .

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