Arbitration and Conciliation (Amendment) Bill, 2021

  • The Arbitration and Conciliation (Amendment) Bill, 2021 (Bill) was introduced in Lok Sabha on February 04, 2021. The Bill sought to amend the Arbitration and Conciliation Act, 1996 (Act) with a view to achieve the following:
    • To grant unconditional stay of enforcement of arbitral awards, where the underlying arbitration agreement, contracts or arbitral award is induced by fraud or corruption
    • To omit the Eighth Schedule of the Act which laid down the qualifications, experience, and norms for accreditation of arbitrators
    • To specify by regulations, the qualifications, experience, and norms for accreditation of arbitrators
  • The Bill replaces an ordinance with same provisions passed on November 04, 2020.

  • Automatic stay on awards

  • The Act allowed a party to file an application, under Section 34 of the Act, to set aside an arbitral award. The Courts, generally, interpreted this provision to mean that an automatic stay was granted on an arbitral award under challenge, the moment an application for setting aside such arbitral award was made before a court.
  • However, in 2015, the Act was amended to state that an arbitral award would not be automatically stayed merely because an application is made to a court to set aside the arbitral award.
  • The Bill, introduced and passed in the Parliament, has specified that a stay may be granted on an arbitral award during the pendency of the setting aside application against the arbitral award, if the Court is satisfied of the following:
    • The arbitration agreement was induced or effected by fraud or corruption; or
    • The making of the award was induced or effected by fraud or corruption.
  • The Bill also specifies that the amendment will be effective retrospectively, i.e., from October 23, 2015.

  • Qualifications of arbitrators

  • Section 47 of the Act will be replaced by Section 43J, which provides that certain qualifications, experience, and accreditation norms for arbitrators will be specified by the Regulations as decided by Arbitration Council of India
  • As a consequence, the Bill has omitted the Eighth Schedule of the Act. It has been stated in the Bill that the qualifications, experience, and norms for accreditation of arbitrators will be specified through regulations.

  • Our view

  • The purpose of the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) wherein the automatic stay on arbitral award was done away with was to prevent parties from misusing the provisions of the Act under Section 34 as stall tactics to comply with the arbitral award.
  • However, with the re-introduction of the unconditional automatic stay on arbitral award albeit in cases of fraud and corruption seems to defeat the purpose the 2015 Amendment was seeking to achieve. Such that the establishing that the award/arbitration agreement was induced by fraud or corruption cannot be summarily decided.
  • The use of the concept of 'fraud' or 'corruption' widens the gambit of interpretation by the Courts. The Courts will have to be extremely cautious in formulating a test for proving 'fraud' or 'corruption' for granting an unconditional stay on the arbitral award. This amendment may lead to excessive litigation by parties to stall the execution of the award and in turn end up wasting precious time of the Court and defeat the purpose of quick resolution via arbitration. Further, the retrospective application of the Bill may open floodgates of litigation.

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