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Sponsored briefing: The changing paradigm of commercial disputes in India

Manoj Singh and Nilava Bandhopadhyay give an overview of the new Indian Arbitration and Conciliation (Amendment) Act

India is one of the fastest growing major economies, even during the present global economic slowdown. A number of ambitious regulatory reforms have recently been launched by the government, resulting in India ranking 63rd in the ‘Doing Business 2020: World Bank Report’ – a jump of 65 places – since 2014. The growth of the economy, has brought with it a multitude of complex, commercial disputes, making commercial litigation inevitable. Being a global economic powerhouse, and in the interest of integrating with the international business community, Indian laws have repeatedly been amended to keep India on par with legal regimes in other leading commercial law jurisdictions. A testament to this is the recent Arbitration and Conciliation (Amendment) Act, 2019, which endeavours to make India a global hub of business by giving effective solutions for dispute resolution through international commercial arbitration. Among others, the amendment seeks to institutionalise and streamline the process of arbitration in India by establishing the Indian Council of Arbitration. The Indian judiciary, too, has played its part by pronouncing a number of judgments aimed at making the country more ‘pro-arbitration’. A catena of judgments – past and recent – have upheld the doctrine of minimal judicial intervention enshrined in section 5 of the Arbitration and Conciliation Act, 1996. This article examines some of the recent legislative changes and judicial changes that seek to transform India into a global commercial litigation hotspot.

The 2019 amendment came into force with effect from 9 August 2019, thereby amending the 1996 Act. The amendment has heavily focused on amending specific sections of the act to make the arbitration procedure more swift and time-bound, which will eventually lead to arbitration being the most preferred mode of dispute resolution in commercial contracts. The highlight of the 2019 amendment has been the creation of the Council of Arbitration. The counsel is required to take any measures necessary to promote and encourage arbitration, mediation, conciliation or other alternative dispute resolution mechanisms, and for that purpose to frame policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration.¹

The 2019 amendment has also introduced a tiered system of referring disputes to arbitral institutions. As per the amendment², arbitral institutions will now be graded by the Council of Arbitration. The grading of arbitral institutions is to be done ‘on the basis of criteria relating to infrastructure, quality and calibre of arbitrators, performance and compliance of time limits for disposal of domestic or international commercial arbitrations, in such manner as may be specified by the regulations’.³ The grading system therefore would speak as to the quality and integrity of a particular arbitral institution and attribute legitimacy to the awards passed by it. The 2019 amendment also empowers the Supreme Court of India (in the case of an international commercial arbitration) and the high courts (in cases other than international commercial arbitration)4 to designate such graded arbitral institutions for appointment of arbitrators. In the event of non-availability of a graded arbitral institution, the chief justice of the high court concerned has the option to maintain a panel of arbitrators for discharging the functions and duties of the arbitral institution.5 This amendment essentially seeks to reduce the intervention of courts in matters of arbitration to increase the effectiveness of the procedure in terms of time. Any application made for the appointment of an arbitrator is now required to be disposed of by the arbitral institution within a period of 30 days from the date of service of notice on the opposite party.6 This newly-introduced, swift and progressive legal regime will go a long way in encouraging more parties to resort to arbitration as the preferred mode of dispute resolution and is a huge step forward in streamlining the process of commercial dispute resolution.

The 2019 amendment has amended section 29 (s29) – providing a time limit for passing an award. The amended s29 provides that awards in matters other than international commercial arbitration have to be made within a period of 12 months from the date of completion of pleadings. It also provides that the award in matters of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of 12 months from the date of completion of pleadings.

The pro-arbitration stance of the Indian judiciary is also evident from the recent saga surrounding the applicability of the Arbitration and Conciliation (Amendment) Act, 2015. Under the unamended act (before 23 October 2015), when an application to set aside an arbitral award was made to the court having necessary jurisdiction, an automatic stay was granted on the enforcement of the award till the application for setting aside was decided or the time for filing such application lapsed. The 2015 amendment, however, provided that no automatic stay would be granted and the award creditor was free to get the award enforced. The issue, however, was that the 2015 amendment was applicable to ‘arbitral proceedings’ commenced after the 2015 amendment came into force and to arbitral proceedings where the parties had consented to applying the 2015 amendment.

‘The Arbitration and Conciliation (Amendment) Act 2019 endeavours to make India a global hub of business.’

The Supreme Court in BCCI v Kochi Cricket Pvt. Ltd7, however, clarified that the 2015 amendment would also apply to court proceedings that had commenced, ‘in relation to arbitration proceedings’, on or after the commencement of the amendment. This had the effect of no automatic stay being granted during the pendency of an application challenging an arbitral award, irrespective of the date of commencement of arbitral proceedings.

The 2019 amendment introduced section 87 (s87) in the act. Section 87 provided that the 2015 amendment would be applicable only (i) to the arbitral proceedings that commenced on or after the 2015 amendment came into force and (ii) to court proceedings that arise out of such arbitral proceedings. Resultantly, it reversed the Supreme Court’s decision in BCCI v Kochi8 and restored the earlier position of automatic stays on awards passed in arbitration proceedings commenced before the 2015 amendment came into force.

The Supreme Court on 27 November 2019 passed a judgment in Hindustan Construction Company Ltd & Anor v Union of India & Anor9, which struck down s87 of the act. The Supreme Court held that s87 would result in there being an automatic stay on all such arbitral awards arising out of arbitral proceedings commenced before the date when the 2015 amendment came into force, which would further delay the process of enforcement of arbitral awards and increases the interference of courts in arbitration matters – in absolute contravention of the primary object and purpose of the 2015 amendment.

In view of the above, there can be no doubt that India is progressing towards greater efficiency and efficacy in resolving commercial disputes.

Manoj Singh   Nilava Bandhopadhyay

Manoj Singh is the founding partner and Nilava Bandhopadhyay is a senior partner at Singh & Associates.

  1. Section 43-D of the act introduced by the 2019 amendment
  2. Section 11(3A) of the act introduced by the 2019 amendment
  3. Section 43-I of the act introduced by the 2019 amendment
  4. As defined under section 2(1)(f) of the act
  5. Section 11(3A) of the act introduced by the 2019 amendment
  6. Section 11(13) of the act
  7. BCCI v Kochi Cricket Pvt Ltd [AIR 2018 SC 1549]
  8. Ibid
  9. Hindustan Construction Company Ltd & Anor v Union of India & Anor [2019(6)ArbLR171(SC)]

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