The legislature has over the past years shown its intention to keep pace with the growing popularity of arbitration as the most preferred mode for resolution of commercial matters. Two major amendments [2015 and 2019] to the Principal Act, clearly testify India's commitment to make the country conducive for both international and domestic arbitrations.
This article focuses on the recent Arbitration and Conciliation (Amendment) Act, 2019 (09-08-2019), which introduced noteworthy changes to the Arbitration and Conciliation Act, 1996 ('Act'), while significantly tweaking some of the formulations introduced by the 2015 Amendment.
This article attempts to give an overview of the important changes brought about by the 2019 Amendment, and their practical implications.
A. CHANGE: NO MORE RETROSPECTIVE
1. Insertion of Section 87, provides that 2015 amendments shall not apply on arbitration proceedings that have commenced before 23-10-2015. The retrospective effect of the far-ranging 2015 Amendment inasmuch as related to Court proceedings has been conclusively determined by the Hon'ble Supreme Court in BCCI v. Kochi Cricket (P.) Ltd. 1 , in the context of Section 36 of the Act, and further in Ssangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India2 , in the context of Section 34 of the Act.
In the case of Kochi Cricket, the Supreme Court had expressed displeasure with the then pending proposal to render 2015 Amendment prospective. The court had urged a re-think in this regard. However, the Parliament has specifically disregarded the advice of Supreme Court, and through 2019 Amendment expressly made the 2015 Amendment prospective in nature.
A.1. RELATIVE IMPLICATION
- The all-encompassing language makes the applicability of the 2019 Amendment prospective not only to arbitration proceedings themselves but also related court proceedings.
- The immediate fallout of this, inter-alia, would that be a large number of execution petitions filed, inspired by the decision in Kochi Cricket, in relation to awards which arose from arbitrations invoked prior to 23.10.2015 and in which Section 34 award-challenge petitions are pending, would now be, unless the same has already been disposed of, rendered nonmaintainable inasmuch as Section 36 of the 1996 Act provides for automatic stay of awards upon the filing of a petition under Section 34.
- However, the 2019 Amendment does not itself contain an express provision about the retrospectivity or otherwise of the changes it introduces to the principal Act.
- Such omission veers to a presumption of prospectivity, which might lead to future litigations, in absence of express provision.
B. CHANGE: MODIFIED TIMELINE FOR COMPLETION OF PROCEEDINGS
- The stringent time-period for completion of arbitration proceedings, for domestic arbitrations (12 months — extendable by 6 months subject to consent of parties, and thereafter of the Court), is now to be reckoned, not from the date of constitution of arbitral tribunal, but from the date of completion of pleading. Pleading shall be completed within 6 months from date the arbitrator receives notice of appointment
- However, international commercial arbitrations have been set free from the mandated pre-determined time-period.
- Also, the introduction of Section 23 (4), provides that Statement of claim and Statement of defense shall be completed within 6 months from date the arbitrator receives notice of appointment.
- Noticeably, time spent to file a rejoinder [in cases with no counter claims] or a rejoinder to counter claim (for cases with counter claims) will not be considered as time spent in completion of pleadings under Section 23 (4)].
B.1. RELATIVE IMPLICATION
- It is, however, unclear as to what are the consequences of a breach of the six-month period by the parties.
C. CHANGE: MANDATE OF THE ARBITRATOR(S) TO CONTINUE PENDING AN APPLICATION FOR EXTENSION OF TIME
- The new Amendment specifies that after the parties approach the court under Section 29A for extension of time to complete the arbitration proceedings, then the mandate of the arbitrator(s) shall continue till the disposal of the said application.
- This ensures continuation of proceedings for the whole time when the said application is pending before the court.
- Prior to this amendment, such period (when S. 29A application is pending before the Court), could not be put to any beneficial use inasmuch as an arbitrator(s) with a lapsed mandate could revive the proceedings only once application under S. 29A had been allowed.
- The amendment provides that during the period an extension of time application for making an award is pending under Section 29 (5), the arbitrator's mandate shall continue till disposal of the application. This amendment would help the tribunals to continue proceedings without waiting for court's decision on extension of time.
- Further, the amendment also provides that, if a court deems fit - a reduction in the fees of the arbitrator(s) while considering a Section 29A application, it shall be done only after giving the arbitrator(s) concerned an opportunity of being heard.
D. CHANGE: CONFIDENTIALITY OF ARBITRATION PROCEEDINGS
- The Amendment introduces Sections 42A.
- The Amendment explicitly incorporates a requirement for the arbitrator(s), the arbitral institution, and the parties to maintain confidentiality of all proceedings, except where disclosure of award is necessary for implementation and enforcement.
E. CHANGE: MANNER OF DEMONSTRATING CIRCUMSTANCE(S) THAT WOULD JUSTIFY INTERFERENCE WITH AN AWARD IN A PETITION UNDER SECTION 34
- Another interesting modification brought about by the recent Amendment is in relation to the manner of 'proving' pre-requisites for interference with an award under Section 34.
- Whereas the provision in the 1996 Act required a party to 'furnish proof' of the existence of circumstances that would justify interference with an award, the 2019 Amendment clarifies that the said circumstances have to be established on the basis of the record of arbitral tribunal.
- The amended Section 34 further clarifies that at the stage of challenge to an award, court will not consider any material other than that present in the record of the arbitral tribunal. Now, the Act provides that recording any kind of evidence is not permissible, unless under exceptional circumstances, as discussed in the recent case of Canara Nidhi Limited v. M. Shashikala.3
E.1. RELATIVE IMPLICATION
- This not only removes the otherwise ambiguous phrase 'furnish proof', it further expressly clarifies that the demonstration has to be made by the party concerned on basis of record of the tribunal alone, thereby expressly barring reference to material which was not placed before the tribunal.
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