The President of India has promulgated the Arbitration and Conciliation (Amendment) Ordinance 2020, notified on 4 November 2020 ('Ordinance'), through which certain provisions of the Arbitration and Conciliation Act 1996 ('Arbitration Act') have been amended. The key highlights of the Ordinance are as follows:
Amendment to §36 of the Arbitration Act
§36 of the Arbitration Act allows a party challenging an arbitral award to obtain a stay on the operation of such an award pending its challenge. A Court may grant a stay "subject to such conditions as it deems fit" and "for reasons to be recorded in writing". In practice, typically, a stay of an award for monies is made subject to a cash deposit of the entirety or a portion of the awarded sums.
§2 of the Ordinance has introduced a proviso to §36(3) of the Arbitration Act which states that the Court "shall" grant an unconditional stay of an award if it is prima facie satisfied that: (i) the arbitration agreement, (ii) the contract which is the basis of award, or (iii) the making of the award was "induced or effected by fraud or corruption".
An explanation has also been added which clarifies that this new proviso "shall apply to all court cases arising out of or in relation to arbitral proceedings irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015".
Amendment to §43J and omission of the Eight Schedule of the Arbitration Act
§43B of the Arbitration Act contemplates the incorporation of the Arbitration Council of India for exercising powers granted to it under the Arbitration Act. §43J, prior to the Ordinance, inter alia, stated that the "qualifications, experience and accreditations of arbitrators" would be as specified in the Eight Schedule, which qualifications could be altered by the Central Government after consultation with the Arbitration Council of India.
§3 of the Ordinance has substituted §43J of the Arbitration Act and the new provision states that "the qualifications, experience and norms of accreditation of arbitrators shall be such as may be specified by the regulations".
Accordingly, §4 of the Ordinance has omitted the Eight Schedule of the Arbitration Act.
The proviso added to §36 (3) by the Ordinance seeks to treat awards where allegations of fraud or corruption are made in relation to the making of the arbitration agreement, the contract or the award, on a different footing as compared to awards which are challenged on other grounds contained under §34 of the Arbitration Act. If the Court is prima facie satisfied with the allegations of fraud or corruption, then it can grant an unconditional stay on the award. It now remains to be seen what objective principles or tests the Courts will lay down in practice for determining a prima facie case of fraud or corruption under the proviso.
In relation to the qualification, experience and norms for accreditation of arbitrators, it appears that specific regulations may be passed.
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