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Arbitration & Conciliation (Amendment) Bill, 2021

Topics Covered: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Arbitration & Conciliation (Amendment) Bill, 2021:


Context:

Lok Sabha Passes Arbitration & Conciliation (Amendment) Bill, 2021.

  • It is already in force by way of an Ordinance promulgated on 4th November, 2020.

Highlights of the Bill:

  1. It seeks to amend the Arbitration and Conciliation Act, 1996 so as to (i) enable automatic stay on awards in certain cases and (ii) specify by regulations the qualifications, experience and norms for accreditation of arbitrators.
  2. Seeks to ensure that stakeholder parties can seek an unconditional stay on enforcement of arbitral awards in cases where the “arbitration agreement or contract is induced by fraud or corruption.”
  3. Also does away with the 8th Schedule of the Act that contained the necessary qualifications for accreditation of arbitrators.
  4. Added a proviso in Section 36 of the Arbitration Act and will come into effect retrospectively from October 23, 2015. As per this amendment, if the Court is satisfied that a prima facie case is made out that the arbitration agreement or contract which is the basis of the award was induced or effected by fraud or corruption, it will stay the award unconditionally pending disposal of the challenge made to the award under Section 34.

Issues raised with respect to proposed amendment to Section 36 of the Act:

  1. It is very easy for the losing party to allege corruption and obtain an automatic stay on enforcement of the arbitral award. Thereafter, the parties will have to wait for enforcement till final disposal by the Court. This defeats the very objective of alternate dispute mechanism by drawing parties to Courts and making them prone to prolonged litigation.
  2. Legislation does not define Fraud/ Corruption.
  3. Retrospective application of Amendment Act (from 2015) with respect to automatic stay may open floodgates of litigation.
  4. Amendment will affect enforcement of contracts and ultimately affect ease of doing business in India.

Background:

Until recently, an arbitration award was enforceable even if an appeal was filed against it in the court under Section 36 of the law. The court, however, could grant a stay on the award on conditions as it deemed fit.

What is Arbitration?

Arbitration is an alternative dispute resolution (ADR) procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.

What is Conciliation?

Conciliation is also an alternative dispute resolution instrument where parties seek to reach an amicable dispute settlement with the assistance of the conciliator, who acts as a neutral third party.  is a voluntary proceeding, where the parties involved are free to agree and attempt to resolve their dispute by conciliation.

InstaLinks:

Prelims Link:

  1. What is Arbitration?
  2. Recent Amendments.
  3. About the International Court of Arbitration.
  4. About the Arbitration Council of India.
  5. Appointment of arbitrators under the 1996 Act.

Mains Link:

Discuss the significance of the Arbitration and Conciliation (Amendment) Act.

Sources: the Hindu.