Arbitration Act On August 26, 2015, the Union Cabinet under Prime Minister Narendra Modi gave its approval to the Arbitration and Conciliation (Amendment) Bill, 2015. This has been done in keeping with the recommendations of the Law Commission and suggestions brought forth by the stakeholders. The Bill would seek to amend the Arbitration and Conciliation Act, 1996.
The Arbitration and Conciliation Act, 1996, was enforced to consolidate and amend the laws relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the laws relating to conciliation and for the matters connected and incidental to this act. However, due to the inordinate delay in settling disputes in India and for reasons of convenience and cost, firms often opted for settling their disputes under English Law. This allowed firms to choose foreign locations for settlement of their disputes. Singapore, London and Paris have been the favourites among top firms in India as locations for conducting arbitration proceeding. According to one media report published in The Economic Times, in Singapore, out of 235 cases in 2012, as many as 49 cases were related to Indian firms.
However, in the recent arbitration case between Aadhar Mercantile and Shree Jagdamba Agrico Exports, Bombay High Court has clarified that those two Indian firms following foreign law in arbitration went against public policy. In this particular case, the two companies had decided to resolve disputes under English Law, which the High Court struck down after Aadhar Mercantile argued that since both companies are Indian, they could not be allowed to deviate from Indian law.
In light of the above ruling and the proposed amendment to the Arbitration and Conciliation Act, Indian firms would now be bound to rewrite their agreements if they have been following English Law in matters of arbitration.
Firms may still opt for settling disputes in a foreign location given the cost and delay in settling disputes in India, as the High Court is silent on whether firms can do so while applying Indian Law. This will effectively outsource arbitration to other countries in many cases. TRUST FUND
In order to ensure speedy and efficient disposal of arbitration cases and thus encourage firms to settle disputes within its jurisdiction, the proposed amendment by the Government of India seeks to cap the duration of the arbitration to 12 months. Parties to the dispute may extend this period up to six months. Thereafter, only the Court, on sufficient cause, can extend the duration of the arbitration.
The amendment also seeks to cap expenditure on arbitration by proposing that the Court may order a reduction in the fee of the arbitrators, which shall not exceed five per cent of the total payable consideration to the arbitrator for each month of delay beyond the stipulated period of nine months from the commencement of the arbitral proceedings. For disputes that are resolved within a span of six months, the Court may award additional fee to the arbitrators if the parties to the dispute agree.
There is also a proposal for fast track procedure for arbitration if the concerned parties agree. Awards in these cases shall be given within a period of six months.
Further, to facilitate speedy expedition of cases, the amendment proposes that the High Court or Supreme Court shall dispose of the appointment of an arbitrator as fast as possible and within a period of 60 days, if possible.
In light of the earlier High Court ruling, it has been proposed that the term ‘public policy of India’ must be restricted as a ground for challenging the award to the cases where fraud or corruption is involved or the making of the award is against the fundamental policy of Indian Law or goes against the grain of morality or justice.
Through these amendments, the Indian government seeks to make arbitration the preferred means for the settlement of commercial disputes by improving the legal framework related to arbitration and making it as cost-effective and user-friendly as possible.