By Gautam Mohanty
Edited by Gaurav Rai
The Arbitration & Conciliation (Amendment) Act, 2019 (“Amendment Act, 2019”) received the assent of the President on 09.08.2019 is yet another major initiative introduced by the Legislature towards making India a hub of domestic and international arbitration and for efficacious conduct and management of arbitration proceedings. This post will briefly aim at bringing forth various changes introduced via the Amendment Act, 2019. The impact of these changes along with a critical analysis of new and amended provisions, however, will be discussed in subsequent posts. Recently, the Ministry of Law and Justice vide its Notification dated 30.08.2019 intimated that Section 1, Section 4 to Section 9, Section 11 to Section 13 and Section 15 of the Amendment Act, 2019 shall come into effect from 30.08.2019. It remains to be seen as to when the other Sections of the Amendment Act, 2019 come into force.
The key provisions of the Amendment Act, 2019 that will be focused are as below:
A. The Arbitration Council of India: The major highlight of the Amendment Act, 2019 is the introduction of the Arbitration Council of India(“Council”) in Section 43A to 43M as Part IA which under the Amendment Act, 2019 will be an independent institution responsible for the promotion and encouragement of arbitration, mediation, conciliation or other alternative dispute resolution mechanism in India (Section 43D). The Council, inter alia, is entrusted with the duty of grading existing arbitral institutions, quality and caliber of arbitrators, performance and compliance of time limits for disposal of domestic or international commercial arbitrations. In pursuance to the above, the Eight Schedule which is to be read as part of Section 43J entails the qualifications, experience and general norms applicable to the Arbitrators.
Further, as per Section 43C of the Amendment Act, 2019 the Council, as according to the Amendment Act, 2019, will consist of a Chairperson who will be either a former judge of the Hon’ble Supreme Court of India or Chief Justice of a High Court or a Judge of a High Court or an eminent person possessing special knowledge and experience in arbitration. The members of the Council as provided for under the Amendment Act, 2019 can be (i) an “eminent arbitration practitioner” having substantial knowledge and experience in institutional arbitration, both domestic and international; (ii) an “eminent academician” having experience in research and teaching in the field of arbitration; (iii) Secretary to the Central Government in the Department of Legal Affairs, Ministry of Law and Justice or his representative not below the rank of Joint Secretary as an ex officio member; (iv) Secretary to the Central Government in the Department of Expenditure, Ministry of Finance or his representative not below the rank of Joint Secretary as an ex officio member (v) one representative of a recognised body of commerce and industry, chosen on rotational basis by the Central Government, as a part-time member, and (vi) Chief Executive Officer-Member-Secretary, ex officio (Section 43C(1)(a)–(f)).
(NOTE – It is highly pertinent to note that these changes i.e. insertion of Part IA which deals with the Arbitration Council of India and the Eighth schedule outlining the qualifications for being appointed as an arbitrator, have not been notified by the Gazette notification of 30th August 2019.)
B. Time Limits for Arbitration Proceedings: The Amendment Act, 2019 introduces 2 significant changes in the context of submission of pleadings and conclusion of arbitration proceedings. The newly introduced Section 23(4) mandates that the Statement of Claim and Statement of Defense shall be completed within a period of 6 months from the date of appointment of the arbitrator(s). Section 29A of the principal Act, has been amended to provide that an arbitral award in domestic arbitrations shall be made by the Tribunal within 12 months from the date of completion of pleadings as stipulated under Section 23(4). Out of experience we have seen that pleadings generally take 3-4 months after the first date of meeting of the arbitral Tribunal. Hence the amendments give the arbitral Tribunal a maximum of 6 months for pleadings + 12 months of regular time + 6 months of time extension by mutual consent of the parties i.e. a total of maximum of 24 months to complete the arbitration proceedings before the need arising for the parties to approach the concerned Court for an extension of time. This however has already started to cause practical difficulties regarding its application, in terms of calculation of time period for the arbitrations which started post 2016 and are already running. However, the authors feel the same will phase out in a year when the new arbitrations which start will follow the new timelines. From a practical standpoint the introduced proviso which provides that during the pendency of an Application for extension of mandate of the Tribunal, the mandate of the arbitrator shall continue till the disposal of the said application atleast ensures that during the pending Application the Tribunal is not functus officio.
C. Confidentiality: The Amendment Act, 2019 introduces Section 42A in relation to confidentiality of information in arbitration proceedings. The newly inserted Sections provide for complete confidentiality of all arbitral proceedings except for the award which is used for the purposes of implementation and enforcement of award.
D. Protection to Arbitrators: The new Section 42B, is a provision aimed at providing complete immunity to the actions taken by an Arbitrator from suits and other legal proceedings provided such actions are done in good faith.
E. Speedy appointment of Arbitrators: The Amendment Act, 2019 attempts to reduce the time period for court appointed arbitrators by way of amending Section 11 of the Principal Act. The amendments introduced empower the Supreme Court and the High Court to designate arbitral institutions or maintain a panel of arbitrators (in jurisdictions where there are no arbitral institutions) for speedy appointment of arbitrators. This will give an impetus to Arbitration institutions to maintain a robust standard to be recognized as an arbitral institution under the Act and to be given the opportunity to appoint arbitrators under Section 11 of the Arbitration and Conciliation Act, 1996.
F. A smaller window for setting aside the Award: Previously, as under Section 34(2)(a) of the Act, 1996 a party making an Application for setting aside of an Arbitral Award had to furnish proof in order to satisfy the requirements postulated for setting aside the Arbitral Award. However, under the Amendment Act, 2019 a party now making an Application does not have to furnish proof for setting aside the award. The amendment limits the scope of interference by Courts by stating that Courts can rely only on materials furnished by Parties before the relevant Tribunal.
As already stated above, the practical impact of the changes along with an assessment of its proposed impacts on arbitration in India will be conducted in the upcoming posts.