Government of India has proposed many amendments to the Arbitration and conciliation Act 1996 as per Consultation Paper prepared by its Ministry of Law and Justice. Law Commission of India had recommended comprehensive review of the Act in its 176th report in 2001. Arbitration Amendment Bill, 2003 was introduced in Parliament of India but same was withdrawn subsequently because many provisions of the Bill were contentious and it was decided that new legislation will be brought in parliament of India after undertaking an in-depth examination of various suggestions and recommendations.
In the meantime, the Supreme Court of India and many of its High Courts had pointed out some lacunas in the Act. Government of India has decided to have consultations for amendment of the Act as it has become necessary to remove difficulties and lacunas in the Act. It has started the process of amending the Act. Experts may send their suggestions. Following sections are proposed to be amended:
| Sr. No. | Section |
| (a) | 2 (1) (e) |
| (b) | 2(2) |
| (c) | 7, 8, 2(1)(b) |
| (d) | 11 |
| (e) | 12 |
| (f) | 28(3) |
| (g) | 31 (7) (B) |
| (h) | 34(2)(b)(ii) |
| (i) | 34 (2)(iii) |
| (j) | 34 A |
| (k) | 36 |
For details see table of amendments at the link provided hereunder:
Important amendments relate to the following provisions:
| Sr. No. | Section | Regarding |
| (l) | 2 (1) (e) | Definition of Court is being amended to avoid present procedure for challenging awards at two levels, one in the subordinate courts and another by way of appeal to High Court. A separate Law i.e. The Commerical Division of the High Court’s Bill, 2009 has been passed by Lok Sabha to constitute Commercial Division in every High Court in India for adjudication of commercial disputes. The Bill is now pending in Rajya Sabha for consideration.
Under the new proposed law, the Commercial Division of the High Court will entertain applications under Section 34 and 36 and appeals under Section 37 of the Act. |
| (m) | 2(2) | Section 2(2) provides that part 1 relating to domestic awards is applicable where place of Arbitration is in India. There were certain controversies relating to application of this part to foreign awards. Amendment is proposed to clarify that Part 1 (except Section 9 & 27) shall apply only to Domestic Arbitrations. |
| (n) | 7, 8, 2(1)(b) | Definition of Arbitration Agreement is being amended to provide that in every commercial contract with a consideration of specified value shall be deemed to have in writing specified Arbitration Agreement. It also provides that all Arbitration Agreements that differs from the proposed clause will stand modified along the lines of the specified arbitration agreements. |
| (o) | 11 | Section 11 relates to appointment of Arbitrators. It is proposed to substitute the appointing authority by substituting the words “by the Chief Justice or any person or institution designated by him” the words “ by the High Court or any person or institution designated by it” |
| (p) | 12 | Section 12 deals with grounds of challenge to the appointment of an Arbitrator. It is proposed to add few more grounds for disclosure of interest by the Arbitrator. |
| (q) | 28(3) | Section 28(3) deals with Rules applicable to substance of dispute. It is proposed to substitute Section 28 (3) as under:“(3) In all cases, the arbitral tribunal shall take into account the terms of the contract and trade usage applicable to the transaction”. |
| (r) | 31 (7) (B) | It provides a very high rate of interest of 18% per annum on the awarded amount which is proposed to be reduced by an amendment to a rate of one percent higher than the current rate of interest. |
| (s) | 34(2)(b)(ii) | It deals with ground of public policy of India for setting aside of award. Supreme Court of India in the case of ONGC Vs. Saw Piper Ltd. in 2003 had held that public policy of India is required to be given wider meaning in public interest which had far reaching consequences . This decision was subject matter of public debate and criticism and law commission of India had suggested of insertion of an explanation to clarify and restrict the meaning of public policy of India as under:“Explanation II- For the purposes of this section “an award is in conflict
with the public policy of India” only in the following circumstances, namely:- When the award is contrary to the- (i) fundamental policy of India; or (ii) interests of India; or (iii) justice or morality.’ |
| (t) | 34 (2)(iii) | It is proposed to add following sub clause :“(iii) the application contains a plea questioning the decision of the arbitral tribunal rejecting –
(a) a challenge made by the applicant under sub-section (2) of section 13; or (b) a plea made under sub-section (2) or sub-section (3) of section 16,”; |
| (u) | 34 A | It is proposed to insert new Section 34 A in respect of domestic awards as under:“34A. Application for setting aside arbitral award on additional ground of patent and serious illegality.-
(1) Recourse to a Court against an arbitral award made in an arbitration other than an international commercial arbitration, can also be made by a party under subsection (1) of section 34 on the additional ground that there is a patent and serious illegality, which has caused or is likely to cause substantial injustice to the applicant. (2) Where the ground referred to in sub-section (1) is invoked in an application filed under sub-section (1) of section 34, while considering such ground, the Court must be satisfied that the illegality identified by the applicant is patent and serious and has caused or is likely to cause substantial injustice to the applicant.” |
| (v) | 36 | Section 36 deals with enforcement of awards which provides that enforcement comes to a stop upon filing of an application under sub section (1) of section 34 to set aside the award.It is proposed to improve the law by providing that an application for setting aside of award shall not operate as a stay of award unless courts grants specific stay order. |