The Arbitration and Conciliation (Amendment) Ordinance, 2020 was promulgated with the purpose of preventing the enforcement of arbitral awards involving fraud or corruption. The stakeholder parties now have an opportunity to seek an unconditional stay of enforcement of arbitral awards when the arbitration agreement or award was induced by fraud or corruption. The provision has retrospective operation and is deemed to be inserted with effect from the date of coming into force of the 2015 Amendment, that is, October 23, 2015.
The Ordinance introduces three important changes:
- Proviso added to Section 36 whereby Court can stay the award if the arbitration agreement or the award was induced by fraud or corruption.
- Section 43J amended to the effect that the qualifications, experience and norms for accreditation of arbitrators shall now be specified by regulations.
- Removed Eighth Schedule of the Act.
UNCONDITIONAL STAY ON ENFORCMENT OF AWARDS
Section 36 of the Arbitration & Conciliation Act that deals with the enforcement of arbitral awards was amended in 2015. As per the amended provision, according to Section 36(2), mere filing of an application under Section 34 for setting aside an award does not automatically stay its enforcement. An application has to be made under Section 36(3) for staying the award and it may be allowed subject to conditions imposed by the court.
The Ordinance adds a Proviso to Section 36 whereby;
“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
- or the making of the award,
was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge made to the award under Section 34.”
The Ordinance empowers the court to unconditionally stay the award until the Section 34 application has been finally disposed of, when it is satisfied that there is a prima facie case of fraud or corruption involved in the inducement of the arbitral award. Similarly arbitration agreements which form basis of award precipitated by such unlawful means could also be stayed.
The new amendment applies to all court cases relating to arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015. It is a departure from, or a further amendment of the 2015 Amendment. The Ordinance is in line with the pronouncements by the Supreme Court on arbitrability of fraud.
However, this amendment operates retrospectively and therefore has the potential of opening floodgates of applications seeking stay of arbitration awards made during the concerned period.
REMOVAL OF QUALIFICATIONS FOR ARBITRATORS
Section 43J of the Act has also been amended to read: “The qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations.” The Eighth Schedule to the Act which deals with Qualifications and Experience of Arbitrators has also been omitted.
The 8th Schedule contained the list of necessary conditions for accreditation of arbitrators and was observed as a hindrance for India getting the benefit of foreign arbitrators. This was criticized by the global community as it laid down a narrow, non-inclusive and exhaustive list of qualifications and experience for arbitrators, which compromised party autonomy. This was a huge obstacle to the end of putting India on the global arbitration map.
To cure this defect, Section 43J has been amended and the Eighth Schedule omitted. Now, the qualifications based on which arbitrators will be accredited will be prescribed by regulations, which will be framed by a proposed arbitration council.
The removal of the Schedule was done with the aim of paving the way for foreign practitioners to act as arbitrators in proceedings with India as the seat of arbitration. The move reinforces that the government is receptive to, and willing to act on, stakeholder feedback to ensure that India maintains its pro-arbitration outlook.
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