How have the new amendments to the arbitration act handled its prior issues?

Alternative Dispute resolution in India comes with its challenges. Though there have been initiatives to make sure India could become an Arbitration Hub for people, investors and clients all around the world, the process of execution and establishment of Arbitration in India for the benefit of everyone was sloppy. The Arbitration and conciliation Act of 1996, was a good introduction to make the process of Arbitration and its founding principles in order but there were gaps such as not using the UNCITRAL Modal laws to their full extent so that the reach of Arbitration could have been wider as India with a country of such a huge population and a lot of pending court case could use some Arbitration for its benefit and relieve the justice system to an extent.

There were issues with our laws that hindered our Arbitration spread and reach domestically as well as internationally, issues like: –

• Ignorance and Lack of Awareness & Misconception

• Rampant with Delays

• Quite Expensive

• Lack of Comprehensive Laws

• Intervention of Courts

To solve these problems the new Amendments of 2015, 2019 and 2021 were brought to the Arbitration and Conciliation Act, of 1996. This Article discusses the actual changes to these issues the new Amendments brought.

Ignorance and lack of awareness & misconception

Ignorance and lack of awareness have always been the basic problem for all types of problems, Arbitration is no different. The 1996 Act and the period are famous for people being skeptical and Judges often resisted referring the case to ADR procedures and the absence of one or both parties also adds needless delay. The legal procedures frequently tend to prolong the proceedings and other vested interests Parties weren’t aware and had false beliefs about ADR and institutional Arbitration as a whole. Since, 2014 the Govt, has taken steps to further Arbitration to the masses and this is the very reason Amendments have been done to the Arbitration and Conciliation Act, of 1996.

The 176th Law Commission report talks about how the report of the Commission discusses the benefits of such an amendment in great detail and clarifies some misconceptions about the benefits of the current Section 11 by pointing out that under the UNCITRAL Model and in the new arbitration laws of various countries, the appointment is on the judicial side. It also discusses, how institutional arbitration might be beneficial for India to become an Arbitration hub globally. It also discusses different changes in many sections of the Arbitration and Conciliation Act, of 1996 which could be changed to make the Act more comprehensive and better for the masses.

The limitations in the law are getting fixed as there have been 3 amendments in 6 years. Scholars and high-level personalities in the field of Arbitration see the new push towards the strengthening of ADR in the country by making amendments to the existing laws, which is to their benefit. Lawyers who wish to be Arbitrators are making people aware of the field of ADR because these changes and steps taken to amend the Act showed them that times are changing and the future will favour ADR. Therefore, will favour the people who will be aware of it.

The New Amendments have done a lot in stopping the awareness problem. Ignorance problem and misconception. But the path to greatness is still a long way because unless Arbitration is the key route to dispute resolution, ADR cannot reach its full potential of helping people.

Rampant with delays

Arbitration Law is very important in India and has been amended repeatedly. India lags from becoming an international arbitration hub because of several reasons, one of which is inordinate delay in passing arbitration awards. If there are excessive disputes and delays then the core of having a speedy resolution through ADR is defeated and the Public Confidence in the arbitral process is weakened, if the winning party is denied justice through delays.

In a recent decision titled “Director General Central Reserve Police Force vs. Fibroplast Marine Pvt. Ltd” dated May 4, 2022, the Hon’ble High Court of Delhi reaffirmed that if a party who has suffered harm has a legal remedy available to them but fails to exercise it promptly, it effectively amounts to depriving them of that remedy. Additionally, the Hon’ble High Court found that excessive and unexplained delays in the rendering of arbitral awards are against public policy and can be challenged under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act). This was done after a change in section 34 in the 2015 Amendment to the Arbitration and Conciliation Act, of 1996. As explanations have been added in Section 34 of the A&C Act by the 2015 Amendment to discuss the conflict with public policy which is the basic foundation of having Arbitration, as solving problems for the public faster is the reason ADR is so important.

In addition, the Hon’ble High Court of Madras, in the case of Mr. K. Dhanasekar v. Union of India and Ors., decided on 10.09.2019, set aside an arbitral award after receiving a request under section 34 of the Arbitration and Conciliation Act, 2015, and holding that excessive and/or unjustified delays in rendering an award are in fact against public policy. The Court noted that the award could be challenged under Section 34(2)(b)(ii) of the A&C Act since it violates Indian public policy due to the excessive and unjustified delay in delivering the decision. This was made possible by the 2015 Amendment and the changes it brought to section 34 by making the importance of public policy very inherent to the Act.

The Arbitrator must unavoidably make the award within the time frame specified by Section 29A, which was added by the Arbitration Amendment Act, of 2015 (further revised in 2019). This time frame is 12 months from the date that the pleadings were completed. Due to these predetermined deadlines, even though the amendment is not applicable in the current case (Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. and Ors on the retrospective application of the Arbitration Amendment Act, 2015), a similar case today would suffer the same outcome. The aforementioned judgement and amending provision often serve as a tool for the losing party to have the arbitral award overturned on procedural grounds rather than substantive ones. These also enhance the court’s interference, which could cause unneeded delays that the ruling or amending provision essentially condemns. Further, the 12 or 18-month time restriction (if extended by the parties) may cause delays in legal processes rather than ADR proceedings, which is what the parties were originally trying to avoid by choosing the ADR mechanism. Additionally, interference or dependence from the court would undermine the secrecy that parties hope to establish through ADR. This is against the spirit of the Arbitration and Conciliation Act and a violation of the confidentiality of arbitral rulings. Finally, this must be considered by the Arbitration Council, which the 2019 amendment established in order to implement the necessary actions to promote and encourage the ADR mechanism and to develop policy and guidelines for uniform professional standards. These are the changes these amendments have brought to the delays in the process and have worked towards fixing them.

Quite Expensive

Arbitration was made to support people for whom litigation would be very costly as it can in fact become very costly sometimes. But over the years the very meaning seems to have faded and Arbitration has become costly too. In the case of Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust and Ors, referring to Singh Builders Syndicate [(2009) 4 SCC 523: (2009) 2 SCC (Civ) 246] observed that the arbitration will have to be saved from the arbitration cost. Ad hoc arbitrations in India, whether they are international or local, are perceived to be time-consuming and excessively expensive by the parties who use arbitration to resolve their disputes. The treatment of two sessions in one day as two hearings for fee purposes, the treatment of a two-hour session as a full hearing for fee purposes, and the treatment of ineffective sittings as fully charged hearings are all common objections. It is noted that the cost per hearing (arbitrator’s fee, lawyer’s fee, cost of travel, cost of accommodations, etc.) may easily reach rupees one million to one and a half million per sitting if there is an Arbitral Tribunal with three arbitrators, if the arbitrators are from different cities if the arbitrations are to be held, and if the arbitrators are accommodated in five-star hotels. That kind of expense is seldom mentioned when the stakes are exceedingly high. However, if there are too many hearings, the cost and efficiency/effectiveness factors are discussed

The Law Commission of India in the 246^th Report mentioned that Similar to conventional adversarial conflict resolution, arbitration can be a costly endeavour. The savings a party realises from not having to pay court fees are typically outweighed by the additional costs of arbitration, which include the fees and costs associated with the arbitrator, the institution, the venue, the hearings, etc. A need for predictability and clarity in the regulations relating to apportionment and recovery of such costs is justified by the possibility of accruing considerable costs. Unless exceptional circumstances warrant an exemption or the parties agree otherwise (only after the dispute has arisen between them), the Commission feels it is just to apportion expenses in a way that reflects the parties’ relative success and failure in the arbitration. This is exactly what was added to Section 31 as Section 31A in the 2015 Amendment as it laid down a defined process in Section 31A (3) where it is mentioned as to how the courts should go about handling the cost of the Arbitration. This helped cut a lot of unnecessary costs in the process of Arbitration. But as laid down in National Highways Authority of India v. Gayatri Jhansi Roadways Ltd case that the learned Single Judge’s conclusion that the change in the language of section 31(8) read with Section 31A which deals only with the costs generally and not with arbitrator’s fees is correct in law was correct.

Therefore, the Amendments helped a lot in cutting costs but they can only protect the part which relates to the process and not the people. For Arbitration to be much cheaper the Arbitrators themselves have to be aware that people need help and charging fewer fees would only attract more clients for their as well as the nations’ benefit.

Lack of comprehensive laws

Arbitration and Conciliation Act 1996, was a great step towards making India more welcoming to Arbitration and ADR as a whole. There were problems with the 1996 Act and to fix those problems new amendments had to be brought, but the first amendment was brought in 2015 before that all we had were LCI Reports, studies, etc to point us that our laws weren’t comprehensive enough and had a lot of flaws and loopholes. These Amendments are working towards rectifying these flaws and loopholes.

On October 23, 2015, the Arbitration and Conciliation (Amendment) Act of 2015 went into effect. The country’s current arbitration law has undergone significant change as a result of the Amendment Act of 2015, making arbitration a profitable ADR method. These adjustments were crucial in helping the nation embrace international arbitration. Among the significant adjustments made were:

The scope and extent of judicial intervention have been significantly reduced. Unless the parties agreed differently, the Act would apply the requirements of Part I to international commercial arbitrations even if the arbitration takes place outside of India. Court has been defined as solely the High Court of competent jurisdiction for the purposes of international commercial arbitration. The provisions of Sections 9, 27, and 37(1)(a) shall also apply to foreign business arbitrations, subject to a provision to the contrary, which was inserted into Section 2(2). The 2015 Act made a significant adjustment by imposing a fixed deadline for wrapping up the arbitration procedure. The time limit was set at 12 months, with an additional 6 months added on. The Arbitration Tribunal will charge additional fees for this reason at a rate of 5% for each additional month of delay. As a result, the 2015 amendment brought about progressive adjustments, even though the 2019 amendment further modified several of these clauses. Here.

The 2019 Amendment Act is a government initiative to make India a friendlier jurisdiction for arbitration and to bring Indian arbitration law into line with many other international jurisdictions. Some of its key characteristics include:

It has decreased judicial involvement. Arbitral institutions will henceforth be in charge of selecting arbitrators. In order to make India a more viable market for foreign investors and a preferable venue for arbitration, it addresses issues raised by the 2015 Amendment Act. Among other things, the Amendment to Section 11 of the Arbitration Act allows for the appointment of the Arbitral Tribunal through the courts in the event that the parties violate their arbitration agreement’s requirement that the Arbitral Tribunal be established. Due to a significant backlog of cases before the courts, the appointment of arbitrators had previously caused delays. The 2019 Amendment will now assist in accelerating this process and, to a certain extent, lighten the workload of the courts. For foreign arbitrations, the prior 12-month deadline for rendering an award in all arbitration processes has been lifted. However, the Tribunals are required to do their best efforts to resolve the international arbitration proceedings within a year. Prior to the 2019 Amendment Act, there was a conflict between the Arbitral Tribunal and the court; however, as of now, the parties may apply to the courts for temporary relief after the arbitral verdict but before it is enforced. The 2019 Amendment Act makes it clear that parties contesting the decision may solely rely on the Arbitral Tribunal’s record, which would hasten the arbitration procedure. The 2019 Act also includes a clause regarding the privacy of arbitration hearings.

In March 2021, the Parliament approved the Arbitration and Conciliation (Amendment) Bill, 2021, which repealed the Arbitration and Conciliation (Amendment) Ordinance, of 2020. The majority of the 2020 Ordinance’s suggestions have been kept, nonetheless. The laws governing local and international arbitration as well as conciliation processes have been introduced to the Arbitration and Conciliation (Amendment) Act, 2021. The repeal of the Eighth Schedule meant that the parties were now free to pick arbitrators regardless of their credentials, and the Eighth Schedule had been criticized for its restrictive nature. The Eighth Schedule was criticized by lawyers because it prohibited foreigners from being appointed as arbitrators in arbitrations with Indian seats. But the 8th Schedule of the 1996 Arbitration and Conciliation Act’s qualifications for arbitrators is repealed by the Amended Act. It is currently suggested that the requirements for arbitrator accreditation be outlined in rules created by an upcoming arbitration council. The removal of the Eighth Schedule is viewed as a positive step that will help to significantly improve India’s arbitration environment. According to the Amended Act of 2021, a court can only grant an unconditional stay if an appeal under Section 34 of the arbitration law is currently proceeding if the award was made as a result of a fraudulent agreement or corruption. The resolution of commercial disputes may now take a lot longer period due to the implementation of these legal amendments, notwithstanding India’s ambition to become a hub of domestic and international arbitration. Here.

The domestic and international arbitration communities have questioned several of these revisions, despite the fact that the majority of them have been in favour of arbitration.

These are the changes the Amendments have brought to make the laws of Arbitration in India more comprehensive as we still have a long way to go but we have come a long way too from the 1996 Act.

Intervention of courts

There was once a severe drawback of arbitration in India, but it has been somewhat addressed by recent legislative changes and judicial rulings. Even while the outcome is in favor of arbitration on the merits, it remains an issue in the few instances where judicial intervention is allowed chiefly because of the huge backlog of cases and the length of time it takes to resolve matters.

Some people believe that judicial intervention is incompatible with arbitration, and this belief is shared by some arbitrators in India as well. The Commission, however, disagrees with this viewpoint. The Law Commission is aware that the court system is crucial to the success of the arbitral process. According to top experts on the subject, arbitration’s paradox is that it actively seeks the cooperation of the very public institutions it aspires to disentangle itself from. The Law Commission has made an effort to choose a middle course in order to strike the right balance between judicial intervention and restraint.

Judicial interference in arbitration procedures dramatically lengthens the arbitration process’s delays and ultimately undermines its advantages. The Law Commission wanted to address the intervention problem by raising the bar for judicial involvement at several phases of the arbitral procedure, including the pre-arbitral (sections 8 and 11) and post-award stages, the relevant revisions to the Act are intended to address still other issue (section 34). This worked as the later amendments solved this very problem. When it comes to solely domestic prizes, the legitimacy of court involvement is far greater than when it comes to other awards.

The virtue of arbitration was dulled as a result of the interpretation of public policy, which led to the opening of a floodgate of litigation under section 34. The judgements that sparked a wave of litigation were harshly criticized in the 246th Law Commission report, which also underlined that section 34 lays out a long list of reasons for contesting an arbitral award, all of which are procedural in nature and do not address substantive issues. The law commission has previously stated that a simple legal error on the part of the tribunal is not a valid reason to annul an arbitration decision. Additionally, the court’s alternative reading of the facts did not constitute a reason to overturn an arbitral ruling. The 2015 Amendment to Section 34 of the Arbitration Act included these significant modifications. These were the reforms that aimed to limit the ability of courts to challenge arbitral awards on the basis of public policy.

Explanation 2 was thus added to Section 2A and Section 34(2) as part of the change. For the avoidance of doubt, section 34(2)’s explanation 2 provides that a consideration of the dispute’s merits is not required to determine whether there has been a violation of Indian Law’s essential policy. Major adjustments were also made as a result of the Supreme Court’s clarification of the definition of morality and justice in the case of Associate Builders v. Delhi Development Authority. The court ruled that an arbitral award must offend the court’s conscience and go against the prevailing mores in order for it to be overturned on moral and reasonable grounds. The preceding case’s revision and interpretation of the phrases moral and justice made it so that courts are no longer allowed to reevaluate evidence or annul judgements solely because the arbitral tribunal handled them incorrectly. These modifications were made in an effort to lessen or eliminate the possibility of judicial involvement in arbitration proceedings, upholding the merit and goal of arbitration. The subjective nature of the court’s conscience, however, continues to be a significant factor in this situation and plays a key role in the court’s authority to intervene in arbitration procedures. Here.

The Chief Justices were tasked with assigning an arbitrator in accordance with an arbitration agreement for arbitrations seated in India prior to the 2015 amendment to the Indian Arbitration and Conciliation Act, 1996 if the parties failed to appoint arbitrators for the hearing. In such a situation, the Chief Justice was capable of conducting a thorough trial of the current case while looking into the existence of the arbitration clause. ADR is killed off by this authority since it falls within the category of judicial power rather than administrative power, which means that it is a direct intervention of the judiciary in the arbitral proceeding. A significant delay in the designation of arbitrators as a result of such action leads to an extremely late award of the arbitral award. The speed of any ADR process, including arbitration, is one of its most important characteristics. Parties that chose arbitration over litigation in order to save time are let down by a delayed award. The Supreme Court, the High Court, or an arbitral institution should designate arbitrators, according to the 246th Law Commission Report, which defined the process as administrative in nature. In essence, such a delegation was made explicitly feasible by the act’s revised Section 11. The modified act further stipulated that the court should try to resolve the application for the appointment of arbitrators within sixty days of the day notice was served on the opposing party. The UNCITRAL Model Law endorses this method of selecting arbitrators, suggesting that any appropriate authority designated by the legislator may carry out the task and need not necessarily be the courts. Here.

Thus, the new amendments are more profoundly in accordance with the UNCITRAL Model Law that helps the arbitration setting of each country in general.

It is a well-known fact that Indian courts play a significant role in conflict resolution; nevertheless, their involvement in arbitration procedures appears to be a breach of both their pending obligations and the arbitration statutes. Despite the changes made by the 2015 Amendment Act, ambiguities and loopholes continue to exist, diminishing the benefits and value of arbitral procedures. The primary goal of arbitration, or alternative dispute resolution (ADR), was to resolve conflicts with the least amount of judicial intervention, which made it dependable in terms of time preservation and effective in preserving the diplomatic connections between foreign parties. If the right changes are made to make the judiciary a support system for the Indian Arbitration system, i.e., a prompt delegation of tasks to Arbitration institutes, limited involvement, and case-by-case examination, the intervention that is being considered might be of a beneficial character. In a nation like India, which is one of the leading players in the modern global market and values its diplomatic commercial connections, closing the remaining gaps and loopholes may result in arbitration gaining the ultimate importance. Thus, it can be inferred clearly that the new amendments have played their parts in fixing the issues the law had.