India - The Arbitration And Conciliation (Amendment) Act, 2019 - Key Highlights.

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13 August, 2019

 

India - The Arbitration And Conciliation (Amendment) Act, 2019 - Key Highlights.

 

On August 9, 2019, the President of India gave his assent to the amendments to the Arbitration and Conciliation Act, 1996 ('Act') and the same has been published in the Official Gazette of India. Some of the key highlights of the Arbitration and Conciliation (Amendment) Act, 2019 ('Amendment Act') are set out below:
 
i. Arbitral Institution
 
Section 1(ca) has been introduced to define an ‘arbitral institution’ as an arbitral institution designated by the Supreme Court or a High Court under the Act. 
 
ii. Appointment of Arbitrators under Section 11 
 
The Amendment Act empowers the Supreme Court (in the case of an international commercial arbitration) and the High Court (in cases other than international commercial arbitration) to designate arbitral institutions for the purpose of appointment of arbitrators. Such arbitral institutions will be graded by the Arbitration Council of India (discussed below). Where a graded arbitral institution is not available, the Chief Justice of the concerned High Court may maintain a panel of arbitrators for discharging the functions and duties of the arbitral institution. 
 
In the absence of a procedure to appoint an arbitrator or failure of such procedure under the agreement, the appointment will be made by the arbitral institution designated by the Supreme Court or the High Court, as the case may be. The application for appointment of an arbitrator will be disposed of by the arbitral institution within a period of thirty days from the date of service of notice on the opposite party. The arbitral institution will determine the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule to the Act.
 
iii. Arbitration Council
 
Part 1A has introduced the concept of an Arbitration Council of India (‘Council’), which will be established by a notification by the Central Government, and will have its headquarters in Delhi. The composition of the Council will include a Chairperson who is a Judge of the Supreme Court/ Chief Justice of a High Court/Judge of a High Court or an eminent person, having special knowledge and experience in the conduct or administration of arbitration, who will be appointed by the Central Government in consultation with the Chief Justice of India. The other Members of the Council will include an eminent arbitration practitioner and an eminent academician. The ex-officio Members of the Council will include the Secretary to the Government of India in the Department of Legal Affairs, Ministry of Law and Justice and Secretary to the Government of India in the Department of Expenditure, Ministry of Finance or their respective representatives not below the rank of Joint Secretary.  One representative of a recognised body of commerce and industry will be a part time member.
 
The Council will, inter alia, promote and encourage arbitration, mediation, conciliation or other alternative dispute resolution mechanisms and for that purpose, will frame policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration. The Council will also frame policies governing the grading of arbitral institutions and arbitrators and recognise professional institutes providing accreditation of arbitrators. 
 
iv. Grading of Arbitral Institutions and Arbitrators
 
The Council will make grading of arbitral institutions on the basis of criteria relating to infrastructure, quality and calibre of arbitrators, performance and compliance of time limits for disposal of domestic or international commercial arbitrations, in such manner as may be specified by the regulations under the Act. The qualifications, experience and norms for accreditation of arbitrators will be such as specified in the Eighth Schedule to the Act.
 
v. Timelines under the Amendment Act 
 
⦁ Completion of pleadings: Section 23 has been amended to state that the statement of claim and defence must be completed within a period of six months from the date the arbitrator or all the arbitrators (as the case may be) received notice, in writing, of their appointment. 
 
⦁ Arbitral award: In cases other than international commercial arbitration, the award will be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings. In the case of international commercial arbitrations, the award may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings. 
 
⦁ Extension of time: Where an application for extension of time is pending, the mandate of the arbitrator will continue till the disposal of the said application.
 
vi. Amendment to Section 34 
 
Section 34 of the Act replaces the words “furnishes proof that”, with “establishes on the basis of the record of the arbitral tribunal that”, to clarify that the parties must rely on the record before the arbitral tribunal alone at the time of challenge of an award. 
 
vii. Amendment to Section 45 
 
Section 45 of the Act, under Part II (power of Courts to refer the matter to arbitration unless it finds that the arbitration agreement is null and void, inoperative and incapable of being performed) has been amended to substitute the words “unless it finds”, with the words “unless it prima facie finds”. 
 
viii. 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; or (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.
 
ix. Confidentiality of the Arbitration Proceedings 
 
The arbitrator, the arbitral institution and the parties to the arbitration agreement must maintain confidentiality of all arbitral proceedings except the award where its disclosure is necessary for the purpose of implementation and enforcement of award.
 
x. Application of the Arbitration and Conciliation (Amendment) Act, 2015
 
It has been clarified that unless the parties otherwise agree, the amendments made to the Act by the Arbitration and Conciliation (Amendment) Act, 2015 will not apply to the arbitral proceedings which commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 i.e., October 23, 2015. This overrules the position laid down by the Supreme Court in BCCI v. Kochi Cricket Private Limited.

 

For further information, please contact:

 

Zia Mody, Partner, AZB & Partners

zia.mody@azbpartners.com