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Sansad TV: Bills & Acts- Arbitration Laws in India

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Arbitration:

  • Arbitration is a settlement of dispute between two parties to a contract by a neutral third party i.e. the arbitrator without resorting to court action.
  • The process can be tailored to suit parties’ particular needs.
  • Arbitrators can be chosen for their expertise.
  • It is confidential and can be speedier and cheaper than court.
  • There are limited grounds of appeal.
  • Arbitral awards are binding and enforceable through courts.

The key Arbitration and Conciliation Act, 2021 amendments include:

  • 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.
  • Seeks to ensure that stakeholder parties can seek an unconditional stay on enforcement of arbitral awardsin cases where the “arbitration agreement or contract is induced by fraud or corruption.”
  • Also does away with the 8th Schedule of the Act that contained the necessary qualifications for accreditation of arbitrators.
  • 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.

Insolvency and Bankruptcy Code:

  • The Code creates time bound processes for insolvency resolution of companies and individuals which should be completed within 180 days. This may extend to 270 days in certain circumstances.
  • If insolvency cannot be resolved, borrower’s assets may be sold to repay creditors.

Commercial Courts Bill, 2015:

  • It enables creation of commercial divisions, commercial appellate divisions in High Courts
  • It also calls for creation of commercial courts at the district level.
  • A commercial dispute includes any dispute related to transactions among merchants, bankers, financers, traders etc.

Challenges in Implementing Arbitration:

  • The core issue here is the capacity of the opposite party to paybecause the arbitration awards are final. Most of the times, the party against whom there is a recovery do not have the money or resources and hence, there is no enforcement. Therefore, the matter keeps dragging on.
  • Taking into account the large business contracts, many of them are stuck because there are no speedy resolution mechanisms available. Courts need to be unburdened from commercial disputes. There are costs associated with arbitration which is not economic.
  • There is enough legal talent in the countrywho have enormous experience that can be used for arbitration. There needs to be a group of trained arbitrators who are assumed to act neutrally.
  • There has to be professionalism in the appointment of arbitrators. The fees which they are eligible of being paid for a particular type of case might be decreased if they are unable to resolve the dispute within the stipulated time period. The parties involved need to have confidence that the decision made would be correct for both of them.

Conclusion:

  • The amendment brought and others is certainly a positive step towards making arbitration expeditious, efficacious and a cost effective remedy. They seek to curb the practices leading to wastage of time and making the arbitration process prohibitively a costly affair.
  • The new law also makes the declaration by the arbitrator about his independence and impartiality more realistic as compared to a bare formality.
  • Making the arbitrator responsible for delay in the arbitration proceedings, would ensure that the arbitrators do not take up arbitrations, which are beyond their capacities.
  • Such a deterrent would ensure self-discipline and control amongst the arbitrators. It can be said that the present amendments certainly are positive steps towards reducing the interference of the Court in arbitration proceedings.
  • Even after arbitration, enforcement remains a major challenge. Arbitration is not independent of the justice delivery system. At every stage, for any interim application, one needs to approach the court.
  • Strengthening arbitration would require a pre requisite that justice is provided along with the execution in place.