The Arbitration and Conciliation (Amendment) Bill, 2021 seeks stay on arbitral awards tainted by fraud
The Government on 4 February 2021 introduced a bill in Lok Sabha to amend the arbitration law to ensure that all stakeholders receive an opportunity to seek an unconditional stay on enforcement of arbitral awards where the agreement or contract is 'induced by fraud or corruption'.
The bill seeks to remove provisions that prescribe qualifications and accreditation of arbitrators, which had effectively excluded foreign nationals from acting as arbitrators in Indian arbitrations. The qualifications are to be specified by regulations, which are yet to be notified.
While introducing the Arbitration and Conciliation (Amendment) Bill, 2021, Law Minister Ravi Shankar Prasad addressed that the bill seeks to check fly-by-night operators who take advantage of the law to get a favorable award by fraud.
Erstwhile, on 4 November 2020, President Ram Nath Kovind had approved the Arbitration and Conciliation (Amendment) Ordinance, 2020, which had amended Sections 36 (enforcement) and 43-J (norms for accreditation) of the Arbitration and Conciliation Act, 1996 (Arbitration Act), a provision was inserted by the Ordinance which stipulated that if the court is satisfied that a prima facie case has been proved, it shall stay the award unconditionally pending disposal of the challenge under Section 34 (Application for setting aside arbitral award) of the Arbitration Act.
Further, the Ordinance also omitted the Eighth Schedule of the Arbitration Act, which dealt with qualifications and experience of arbitrators, and had faced criticism from some quarters that the conditions prescribed in the law came in way of India getting the benefit of having foreign arbitrators.
The current 2021 Bill intends to replace the ordinance issued on 4 November 2020.
According to a government functionary, it was felt that a 'wrong impression' had been created on a significant issue.
Significantly, the qualifications on the basis of which arbitrators are to be accredited will be prescribed by regulations, which is to be framed by a proposed Arbitration Council.
As per the proposed amendment, if the award is being given on the basis of an agreement based on fraud or corruption, then the court will not impose a condition to stay the award and grant an unconditional stay during the pendency of the appeal if it has been challenged under Section 34 of the arbitration law.
The bill, according to the statement of objects and reasons, provides for 'unconditional stay of enforcement of arbitral awards, where the underlying arbitration agreement, contracts or arbitral award is induced by fraud or corruption'.