Indian Arbitration and Conciliation Act 1996

The ‘Arbitration and Conciliation Act 1996’ is an Act that regulates domestic arbitration in India. It was amended in 2015 and further ammendment passed in Lok Sabha on 1 August 2019.

The Government of India decided to amend the Arbitration and Conciliation Act, 1996 by introducing the Arbitration and Conciliation (Amendment) Bill, 2015 in the Parliament. 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 23 October 2015 promulgated an Ordinance (Arbitration and Conciliation (Amendment) Ordinance, 2015) amending the Arbitration and Conciliation Act, 1996. The Union Cabinet chaired by the Prime Minister, had given its approval for amendments to the Arbitration and Conciliation Bill, 2015

Qualifications and Experience of Arbitrators

A person will not be qualified to be an arbitrator unless he is/ has been:

(i) an advocate within the meaning of the Advocates Act, 1961 having ten years of practice experience as an advocate

(ii) A chartered accountant within the meaning of the Chartered Accountants Act, 1949 having ten years of experience

(iii) A cost accountant within the meaning of the Cost and Works Accountants Act, 1959 having ten years of experience

(iv) A company secretary within the meaning of the Company Secretaries Act, 1980 having ten years of experience

(v) An officer of the Indian Legal Service

(vi) an officer with law degree having ten years of experience in the legal matters in the Government, autonomous body, public sector undertaking or at a senior level managerial position in private sector

(vii) an officer with engineering degree having ten years of experience as an engineer in the Government, autonomous body, public sector undertaking or at a senior level managerial position in the private sector or self-employed

(viii) an officer having senior level experience of administration in the Central Government or State Government or having experience of senior level management of a public sector undertaking or a Government company or a private company of repute

(ix) a person having educational qualification at degree level with ten years of experience in a scientific or technical stream in the fields of telecom, information technology, intellectual property rights or other specialized areas in the Government, autonomous body, public sector undertaking or a senior level managerial position in a private sector, as the case may be.

The Schedule also prescribes general norms applicable to arbitrators, including the following:

• The arbitrator must be impartial and neutral and avoid entering into any financial business or other relationship that is likely to affect impartiality or might reasonably create an appearance of partiality or bias amongst the parties;
• The arbitrator must be conversant with the Constitution of India, principles of natural justice, equity, common and customary laws, commercial laws, labour laws, law of torts, making and enforcing the arbitral awards, domestic and international legal system on arbitration and international best practices; and
• The arbitrator should be capable of suggesting, recommending or writing a reasoned and enforceable arbitral award in any dispute which comes before him for adjudication.

2015 Amendment

The following are the salient features of the new ordinance, introduced in 2015:

The first and foremost 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.

Through the amendment, 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 arbitration, 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.

Section 8, which deals with ‘Reference of parties to the dispute to arbitration’, was amended. 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 that prima facie no 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.

Lastly Section 9, dealing with ‘Interim Measures’ was also amended. 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 efficacious.