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August 24, 2016

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New Arbitration Act: Is It Really A Game Changer?


- Justice Anoop V. Mohta, Sitting Judge [ Bombay High Court ]

Justice Anoop V. Mohta

"Make in India" is an insightful commercial movement. For a fruitful effect the parliamentarians have been making various provisions to achieve the goal. The commercial world has been preferring arbitration process to settle their disputes. These new provisions bolster the arbitration process at national and international level. Before drafting of the arbitration clause and agreements,a pre-study and research of the latest provisions, trade practice, usage and custom must be looked into, to achieve an early, less expensive and executable award.

The amended Arbitration Act, 2015 (3 of 2016), needs to be read with the provisions of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Court Act, 2015 (for short, "the Commercial Courts Act") w.e.f. 23 October 2015. "Commercial dispute" means a dispute arising out of various commercial transactions as defined.

The Commercial Courts Act provides constitution of commercial courts, appellate divisions and its jurisdiction to try any commercial dispute of a "specified value" within the State. All suits and applications, including arbitration petitions/ appeal relating to commercial disputes of specified value pending in the court, should be transferred to the respective commercial courts.

The commercial appellate bench is to deal with orders passed by the commercial court/division. The mandate is also for commercial appellate bench to dispose off the appeal expeditiously, within six months. The amended provisions of the code of civil procedure, are also extended to such disputes for early disposal. This commercial court shall have overriding effect.

International Commercial Arbitration

The concept of International Commercial Arbitration is defined, where at least one party should be of a foreign origin or from another country. By the amendment act, the provision of Sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of Section 37 are made applicable to International Commercial Arbitration, even if the place of arbitration is outside India, and an arbitral award made and/or to be made in such place is enforceable and recognised under the provisions of Part II of the arbitration Act.

Arbitral proceedings to be commenced within ninety days

By adding Clauses 2 and 3 to Section 9, it is stated that once the order is passed under Section 9, the arbitral proceedings should be commenced within a period of ninety days. It is also provided that the Court shall not entertain an Application under sub-section (1) of Section 9, unless circumstances exist, which may not render the remedy provided under Section 17 efficacious.

Arbitrator's fee structure

Section 11 is also amended by inserting in, sub-Section (6- A), (6-B), (8), (10), (12) and (13). Section 11-A provides the power of Central Government to amend the fourth Schedule.

Arbitrator's model fees structure, in reference to the respective dispute is added for the first time through the fourth schedule in reference to Section 11(14) of the amended act. Additional feature is that if the arbitral tribunal, is a sole arbitrator, he shall be entitled to an additional amount of 25% on the fee payable, as per the table so set out. A ceiling of `30 lakhs is provided towards the Arbitral fees for dispute whose subject matter is above `20 crore (approximately). This is a subject matter of discussion, specifically by and amongst arbitrators. However, litigants/parties are appreciating these provisions. For the determination of such fees and its manner and/or its payment, the High Court is required to frame rules after taking into consideration the rates so specified. There is a clear rider, however, that this sub-section shall not apply to the international commercial arbitration and in other arbitration where the parties have agreed for determination of fees as per the rules of an arbitral institution.

Procedure and challenge to arbitrators' appointment/selection

Section 12 is substantially amended by bringing various grounds for challenge to the arbitrator's appointment.

Section 12 sub-clause 1(b) is again additional factor elaborated to support independence and impartiality of arbitrators by removing even justifiable doubts. This covers arbitrator's relationship with the parties/counsel/ relationship of arbitrator to the disputes and the arbitrator's direct or indirect interest in the dispute. previous services for one of the parties or other involvement in the case, relationship between the arbitrator and or counsel, relationship between the arbitrator and the parties involved in the arbitration. A form is also prescribed to fill in, in this regard, for declaring, including prior experience and of ongoing arbitration.

Arbitrators' relation with the parties or counsel

Same section 12(5), deals with arbitrator's relationship with the parties and counsel. It further provides that the arbitrator shall be ineligible to be appointed, if he falls within the ambit/categories specified in the seventh schedule irrespective of any prior agreement to the contrary. However, it can be waived by the parties. This covers categories of arbitrators having relationship with the parties and/or counsel or relationship of the arbitrator or the arbitrator's direct or indirect interest in the dispute.

Mandate of termination or substitution

Section 14/15/25 is also substituted for failure or impossibility to act by the arbitrator for the grounds so recorded.

Tribunal power is enlarged for interim measures

Section 17 empowers the Arbitral Tribunal to pass enforceable orders or interim measures, like court, pending Arbitration proceedings and even after the passing of the award. This order is appealable under Section 37 of the Act.

Statement/defence/set-off time limit

Provisions are also added to Section 23 which deals with the statements of claim and defence, covering the aspect of counter-claim and/or set-off.

Oral hearing/argument on day-to-day basis by and before the tribunal

Amended Section 24 provides for hearing and written proceedings, including oral hearings/arguments on day to day basis, and avoid adjournment unless sufficient cause is made out, including power to impose costs for the same.

Default of a party

The Arbitrator is provided with a power under Section 25 to forfeit to file defence statement, if failed to take steps within time so prescribed.

Courts' Assistance for International Arbitration

Section 27 is now permitted to be invoked in international arbitration for seeking the Court's assistance in taking evidence.

While making the award and/or termination of proceedings, the international arbitration/disputes now can be decided in accordance with the rules of law designated by the parties, as applicable to the substance of the dispute. This is by keeping in mind the terms of the contract and trade usage applicable to the transaction (Section 28).

Time Limit for Arbitral Award

Section 29-A is an additional feature of providing time limit for Arbitral Award. The Award should be made within 12 months from the date of reference, which is extendable by 6 months more, by consent of the parties. If award is not made within a specified period, mandate of Arbitrator shall terminate unless the Court extended the period. If the case is made out. The Court constitutes or substitutes one or all of the Arbitrators, the arbitral proceedings should continue from the stage already reached on the basis of the evidence of material on record. Specific power is provided to the Court to reduce the fee of arbitrators for delay- 5% for each month.

Fast Track Procedure

Section 29-B provides for a Fast Track procedure, whereby the parties may agree, at any stage, either before or at the time of appointment of arbitral tribunal, to have their dispute resolved fastly. The detail procedures are provided for conducting such fast track arbitration. The award needs to be passed within a period of six months. Special fee is also payable to the arbitrator, subject to agreement between the parties for the same.

Recourse against Arbitral Award

Application for setting aside arbitral award under Section 34 is provided with the detail concept of "conflict with the public policy" and "the patent illegality appearing on the face of record", but not on the ground of "erroneous application of the law" or "by re-appreciation of evidence". Sections 34 (4) and (5) empower the Court to give the Arbitral tribunal an opportunity to resume the arbitral proceedings to eliminate the grounds for setting aside the arbitral award after giving the due notice to other side. Such application needs to be disposed of within a period of one year.

Enforcement of awards/degree

In the enforcement clause under Section 36, it has provided for an application to set aside the award itself shall not render the award unenforceable, unless the Court grants conditional order of stay of the operation of the award, with reasons. The Court needs to treat the arbitral award for payment of money, as a "money decree" before passing any conditional order of stay.

Appeal

Appeal is provided under Section 37 against the order of award under Section 34 order. The order under Section 8 and Section 9 are covered for domestic and international arbitration also.

For enforcement of foreign award, Section 48 explanation is added, covering the definition of "Court" and also included the concept "conflict with the public policy of India". For Geneva Convention award, same provisions are added in Sections 56 and 57. Basic amendments are in Part I and the Arbitration Act Section 1 to 43 including in Sections 48 and 56. Appeal is available under s50/59 in part two matters.

Efficacious disposal

Amended Arbitration Act shall not be applicable to the Arbitration proceedings "already commenced", unless the parties agreed otherwise. However, this amended Act shall be applicable to the Arbitration proceedings "commenced on or after the date of commencement of this Act (w.e.f. 23 October 2015). Pending "Arbitration proceedings" before the arbitral tribunal and "pending Arbitration Petition" in court need to be treated differently, in view of the provisions of Commercial Courts Act also, referring to the transfer (Section 15) of pending Suits and Applications and applicability of the Commercial Courts Act and its provisions for expeditious/efficacious disposal of all such Applications.

This is not the conclusion but just a beginning. These laws are in the interest of all, specially one who want to participate in commercial globalisations.

Let us implement and follow the provisions to see the difference. The teething problems can always be resolved or solved. These provisions are to save time, money and energy of all. It is for effective, early, timely and fruitful process to resolve the disputes in the commercial disputes or even otherwise.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.

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