T
he ever-changing landscape of arbitration is undergoing yet another transformation. The legislature has recently come out with draft Arbitration and Conciliation (Amendment) Bill, 2024 (Draft Bill) in order to amend the
(the Act) to bring it in line with the recent judicial pronouncements and to promote ease of doing business in India. The proposed amendments aim to shorten the timelines and resolve various practical issues faced by the parties in the arbitral process. The key changes suggested in the Draft Bill have been summarised below:
Definition of the term “court” — The Draft Bill suggests substitution of the present definition of court by adding Section 2-A. As per the new definition, in domestic arbitrations seated in India, it would mean a court having pecuniary and territorial jurisdiction over the seat of arbitration. Further, if no seat has been designated, the Court with pecuniary and territorial jurisdiction over the subject-matter. Whereas, in International Commercial Arbitrations where place of arbitration is in India, it would mean the High Court having territorial jurisdiction over the seat and if no seat has been designated, the High Court having territorial jurisdiction over the subject-matter of the dispute would exercise supervisory jurisdiction.
Interim measures —
(a) Section 9: The Draft Bill suggests that courts should be divested of the power to grant interim reliefs under Section 9 during the pendency of the arbitration as the arbitrator under Section 17 is sufficiently equipped to grant any and all interim reliefs which are granted by the courts. This would reduce the time lost by the parties in approaching the courts for obtaining interim reliefs when the same can very well be granted by the Arbitral Tribunal conducting arbitration.
(b) Emergency arbitration: An Emergency Arbitral Tribunal is generally appointed before the constitution of the Arbitral Tribunal to obtain urgent interim reliefs. The concept of emergency arbitrations was recognised by the Supreme Court in Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. . The Draft Bill suggests providing statutory recognition to the same through Section 9-A. The orders passed by the emergency arbitrators shall be enforceable under Section 17(2) of the Act.
(c) Section 17: TheDraft Bill suggests granting the power to confirm, modify, or vacate any past interim orders passed under Sections 9 and 9-A to the Arbitral Tribunal.
Timelines — Currently, the parties end up wasting a lot of time in procedural applications which ideally should not take as long as they do for all practical purposes. This also happens because currently, the Act does not prescribe timelines for various applications. However, in order to overcome the same, the draft amendment suggests various timelines:
(a) Disposal of Section 8 application:The Draft Bill suggests that a Section 8 application must be disposed of within 60 days from the date of filing.
(b) Filing of Section 11 petition: Presently, the Act does not prescribe any limitation for filing of Section 11 petition. This vacuum was first pointed out by the Supreme Court in BSNL v. Nortel Networks India (P) Ltd. wherein, the Court held that Section 11 would be governed by the residuary article in the Schedule of the and thus the parties would have a limitation period of 3 years to file the same. However, the Court also noted that such a long period of limitation runs contrary to the intent of expeditious resolution of commercial disputes. Hence, it suggested the legislature to prescribe a specific period of limitation. Thereafter, this issue was pointed out again in Arif Azim Co. Ltd. v. Aptech Ltd. wherein, the Court held that the parties have a period of 3 years for filing a Section 11 petition from the date of serving of the notice invoking arbitration, unless the claims to be raised therein are manifestly time-barred. Hence, the Draft Bill suggests that parties must file Section 11 petition within 60 days of failure of appointment of the arbitrator rectifying the legislative vacuum while preserving the objective of speedy trial.
(c) Disposal of Section 16 application: The Draft Bill suggests that Section 16 application must be decided as a preliminary issue within 30 days of filing. However, it also provides an opportunity to the Arbitral Tribunal to decide the issue later for reasons to be recorded in writing.
(d) Commencement of arbitration when Section 9 application is filed prior to appointment of the arbitrator: Presently, when Section 9 application is filed before the commencement of the arbitration, the Act stated that the arbitral proceedings must commence within 90 days from the date of passing of the order in that application. However, the Draft Bill suggests changing the same to 90 days from the date of filing of the application before the court. This would further truncate any and all delays involved before commencement of arbitration.
(e) Section 37: As on date, the statute does not provide for any limitation for filing an appeal under Section 37. Since Section 37 provides for appeals from various kinds of orders, the limitation is currently calculated, as per the CPC, based on the kind of order under appeal. However, the Draft Bill suggests that all Section 37 applications must be filed within 60 days from the date of receipt of the order appealed against irrespective of the kind of order.
Fees of the Arbitral Tribunal — The Draft Bill suggests deletion of the Fourth Schedule. Further, the fees of the Arbitral Tribunals shall be determined by the Arbitration Council.
Seat versus venue — In an attempt to end the timeless debate about seat and venue of arbitration, the Draft Bill suggests two options to amend Section 20. The first one is to replace the word “place of arbitration” with either seat or venue as appropriate. The second, is to designate the place where the contract is executed or where the cause of action has arisen as the seat of domestic arbitrations seated in India. However, this option fails to address the issue of seat for ICAs conducted in India.
Post-award interest rate — The Draft Bill suggests revising the post-award interest rate to 3% above the repo rate of the RBI from the present 2% above the “current rate of interest”. The courts have continuously split hairs while interpretating the term “current rate of interest”. Hence, the suggested change would put this issue at rest.
Appellate Arbitral Tribunal — Currently, the Act does not create an embargo on formation of an Appellate Arbitral Tribunal. In fact, the Supreme Court in Centrotrade Minerals and Metals Inc. v. Hindustan Copper Ltd. allowed the parties to approach an Appellate Arbitral Tribunal for resolution of disputes subject to a statutory challenge. The Draft Bill suggests providing a statutory recognition to this under Section 34-A. However, such Appellate Arbitral Tribunals can only be institutional. Further, in such cases, the parties would be precluded from approaching the court under Section 34. Nonetheless, the Draft Bill does not define the scope of the powers of an Appellate Arbitral Tribunal. One could pose a question whether it would have a wider scope of interference than that present with the courts under Section 34 if the parties consented to such a mechanism in their contract. In other words, whether an Appellate Arbitral Tribunal would be allowed to sit in appeal over an award and decide the appeal on merits if the parties agree to the same.
Remand of partial award — The Draft Bill suggests that when an award is partially set aside under Section 34, the court/Appellate Arbitral Tribunal may send it back to the original Arbitral Tribunal to decide limited issues, afresh. However, this overlooks the fact that once the award is passed, the Arbitral Tribunal becomes functus officio. The Act, shows that once an award is passed, the Arbitral Tribunal may only modify it to a limited extent under Sections 33 and 34(4). Hence, the suggested change is invalid and cannot hold ground.
Appeal under Section 37 application — As on date, the Act does not allow the parties to challenge an order rejecting Section 11 petition. this puts a quietus to the issue at the first stage itself, allowing parties to approach the civil courts for obtaining relief. However, Draft Bill suggests that an order rejecting appointment of the arbitrator under Section 11 can also be challenged under Section 37 of the Act. However, this would further lengthen the timelines involved in resolution of the dispute.
Section 42 — Section 42 provides that once an application under Part I has been filed before a court, all subsequent applications must be filed in the same court. This section has created more problems than it solved, especially in cases where the contract is not clear about the seat and venue of arbitration and the parties file a Section 9 or Section 11 petition in the wrong court; or during enforcement of awards when assets of the award debtor lie in different jurisdictions. Since the courts have settled the law and clarified each of these issues, the provision has become redundant and hence warrant deletion as has been rightly suggested in the Draft Bill.
Conclusion
All of the above changes do provide a certain extent of clarity with respect to several practical issues faced by the parties and bring the Act in line with the recent judicial pronouncements. However, a lot still needs to be done in order to actually pave the way for making India a preferred seat of arbitration especially, with international parties. For instance, the ground of patent illegality is not available with the parties involved in ICAs seated in India. As per the Act, an arbitral award in ICAs, which is against the provisions of the contract or provides an implausible interpretation to the terms of the contract still passes the muster provided under the grounds of challenge and cannot be set aside; there is no time-limit for disposal of enforcement petition due to which even after having a favourable award, the parties are made to run from pillar to post to enforce the same which throws them off and discourages the parties to prefer India as the seat of arbitration. The Draft Bill neglects ICAs and issues pertaining to foreign awards. The legislature needs to address various issues arising under these as well to actually increase the ease of doing business in India.
* Partner, LKS Attorneys
**Principal Associate, LKS Attorneys
***Senior Associate, LKS Attorneys
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