A & C (amdt) Act 2015 - Sept 2016

THE ARBITRATION AND CONCILIATION (AMENDMENT) ACT, 2015

Mahesh Kumar GuptaExecutive Director/Engineering Projects (I) Ltd.

B-4, Sector-44, Noida-201301mob: 9899300900, e-mail: [email protected]

WELCOME TO INTERACTIVE SESSION

CONTENTS

1. Arresting flight of Arbitration cases abroad2. Independence/Impartiality of arbitrators3. Expediting settlement of disputes4. Minimum interference by the Courts in Arbitration5. Empowering Arbitrators for interim measures6. Cost of arbitration & Model fee structure7. Counter statement within scope of reference

CONTENTS

8. Scope of setting aside of award 9. Removal of automatic stay of award10. Interest on award11. Applicability of amendment (prospectively)12. Link for the Presentation & Amendment Act END

1 (1). Arresting the flight of Arbitration cases abroad

• Lack of Trust was the main reason.• Employees, Advisors, Advocates, Consultants as

Arbitrators. (No more as per Vth/VIIth Schedule.)• Delay in appointment of arbitrators.• No Time bound arbitration.• Frequent challenge & setting aside of award due to vague

term of public policy.• Difficult to enforce the award if place in India.

1 (2). Arresting the flight of Arbitration cases abroad

• Difficult to enforce the interim measures by Court.• Extg. 2(2) Part I to apply where the place of arbitration is in India. The said provision preempted the powers of

Indian Courts in respect of Interim measures, assistance in taking evidence etc. e.g. prohibition of sale of assets etc.

• According to new provisio to Sec 2(2), subject to an agreement to the contrary, the provisions of sec. 9, 27, 37(1)(a) shall also apply to international arbitration, even if the place of arbitration is outside India.

2(1). Independence/Impartiality of arbitrators

• Extg. Sec. 11(8) (b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator. It did not specify justifiable doubts as to the independence & impartiality of an arbitrator.

• Builders made their advocate, Clients made their employees as arbitrator, being against the PNJ.

• As per new sec. 12(1) (a) Arbitrator when approached, shall disclose his relationship likely to give rise to justifiable doubts as to his independence or impartiality in writing i.e.


• i.e. direct or indirect, any past or present relationship or interest in any of the parties or in relation to the subject matter in dispute, whether financial, business, professional or other kind.

• Grounds in Vth Schedule are guiding factors.• Even if an agt. Provide for appointment of certain

categories, the same shall not withstand if the agreed arbitrators come under the categories specified in Seventh Schedule.

• The above provisions are introduced as per IBA Guidelines


• Grounds for justifiable doubts:• Employee, Consultant, Advisor, past or present business

relationship,• Currently advises party or its affiliate, represents law firm

acting as counsel of the party, lawyer in firm representing party,

• Significant financial interest in one of the parties,• Manager, Director or part of Management, commercial

relationship, regular advisor, family relationship,• Given legal advice on the dispute, close family member

holding interest in the company etc.


• Appointed arbitrator on two or more occasions, acted as a counsel for or against the party in last 3 years.

• Arbitrators are lawyers in the same firm • However, the parties may, subsequent to disputes having

arisen between them, waive the applicability of this sub-section by express agreement in writing.

• Mandatory to make a disclosure by the Arbitrator as regard to Number of on-going arbitrations, past or present relationship or interest likely to give rise to justifiable doubts as to independence or impartiality.

3(1). Expediting settlement of disputes

• The Court to expeditiously dispose the application for appointment of arbitrator under new sec. 11(13) with endeavor to dispose within 60 days from the service of notice on opposite party.

• To reduce the time in appointment of arbitral tribunal, as per new sub sec. (6A), the court shall, notwithstanding any judgement, decree or order of any court, confine to the examination of the existence of an arbitration agreement.

• 1940 Act, sec 28 gave power to court only to enlarge time for making award except with the consent of the parties.

• 1996 Act did not limit the time for the arbitrators so far.


• As per new sec. 12(1)(b), arbitrator to disclose his ability to devote sufficient time to complete the entire arbitration within a period of 12 months.

• As per new section 29A, the award shall be made within 12 months from the date of entering upon the reference i.e. appointment of arbitral tribunal.

• Incentive of entitlement of additional fees if award made within 6 months.


• The parties may extend period not exceeding 6 months by consent.

• The mandate of the arbitrator shall terminate if award not made in time unless the Court extends the same.

• Extension by court on sufficient grounds only & on terms i.e. costs etc.

• Court may also reduce the fees of the arbitrators for the delay

• Court may substitute one or all the arbitrators.• Court will endeavour to dispose the matter of

extension/termination of arbitrators within 6 months.


INTRODUCTION OF FAST TRACK PROCEDURE• The parties may at any stage agree for fast track

procedure consisting of sole arbitrator.• The dispute to be decided by written pleadings without

any oral hearings except for clarifying certain issues or any further information.

• The award shall be made within a period of 6 months.• The fees shall be as agreed between the arbitrator and

the parties.


• The fee of arbitration fixed on claim amount instead of per hearing fees incentivizing the arbitrators to expedite the arbitration proceedings and publication of award.

• The provision of imposing costs for frequent and unnecessary adjournments.

• Application for setting aside award to be disposed off expeditiously and in any event within one year.

4 (1). Minimum interference by the Courts in Arbitration

• Appointment of arbitrator as administrative powers of Court

• Appointment: No appointment only if the arbitration agreement does not exist or is null and void/no valid arbitration agreement. {Sec.8(1) & 11 (6A)}

• Test: prima facie satisfaction regarding the existence of an arbitration agreement & bound to refer the parties to arbitration

• Final decision of existence of the arbitration agreement: Impliedly lies with the arbitral tribunal in accordance with

section 16, as a preliminary issue. If arbitration rejected, the decision of the Court would be final & conclusive.

4 (2). Minimum interference by the Courts in Arbitration

• New sub section 11.(6B): The designation of any person …… shall not be regarded as a delegation of judicial power by Supreme Court or the High Court.

• Since not regarded as judicial power, the decision would be final and no appeal.

• Remedy would be before the arbitral tribunal. • Deviation from SBP Company vs. Patel Engineering case,

beforehand the Limitation, Accord & satisfaction, excepted matters were not in jurisdiction of the tribunal if the tribunal was appointed by the Court.

• Henceforth, the Arbitral Tribunal will be vested with powers to adjudicate the questions of limitation, accord & satisfaction, excepted matters etc. in all cases.

5 (1). Empowering Arbitrators for interim measures• Extg. Sec. 17. Unless otherwise agreed by the parties, the

arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection.• Substituted sec. 17(1). A party may, (even if agreed, party can

apply now) any time before arbitral award is enforced, apply for an interim measure of protection in respect of namely:—• (i) appointment of guardian. • (ii)(a) the preservation, interim custody or sale of any goods

which are the subject-matter • (b) securing the amount in dispute in the arbitration;• (c) detention, preservation, inspection of property/thing

which is the subject-matter, or as to which any question may arise therein and authorising for any of the aforesaid

5 (2). Empowering Arbitrators for interim measures purposes any person to enter upon any land or building in

the possession of any party or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

• (d) interim injunction or the appointment of a receiver;• (e) such other interim measure of protection as may

appear to the Arbitral Tribunal to be just and convenient, and the arbitral tribunal shall have the same power for making orders as the Court has for the purpose of, and in relation to, any proceedings before it.

• (2) Orders of the arbitral tribunal as the orders of the Court & enforceable under CPC, 1908.

6 (1). Cost of arbitration & Model Fee Structure

• Although claim of reduction of fees, but instead increase the cost of arbitration as per model fees structure.

• Model fee structure introduced and the ceiling of Rs. 30.0 lakhs fixed. (not mandatory, shown in next slide)

• Regime for costs introduced to discourage frivolous claims i.e. “costs follow the event” i.e. generally unsuccessful party to pay the costs, reasons to be stated for different order, frivolous counter claims leading to delay, denial of reasonable offer to settle, frequent adjournments to be taken into account.

• Advisable to finalise the fees with arbitral tribunal before their appointment.


• Existing Sec. 31(8) Unless otherwise agreed by the parties,(a) the costs of an arbitration shall be fixed by the arbitral tribunal has been removed due to hurry.

• As per substituted 31(8), the Costs shall be fixed as per Sec. 31 A.

• Costs would include the fees of arbitrators, courts, witnesses, legal fees & expenses, any other expenses incurred in connection with the arbitral proceedings.

• As per 31A.(1), the Court or arbitral tribunal shall have the discretion to determine the above costs.

• Seems to be a hurried drafting as parties not entitled to fix the fees of arbitrators.


• Any agreement as to the fees before dispute would not be valid.

• Discretion to whom costs are payable, amount of such costs, when the costs to be paid.

• Agreement that parties have to share the costs in some proportion shall be valid only if made after the arising of the dispute.

6 (4).Model fee structure

Sum in Dispute (Rs.) Model Fees (Indicative) Upto Rs. 5,00,000/- Rs. 45,000/-

Above Rs. 5,00,000/- & upto Rs. 20,00,000/-

Rs. 45,000/+ 3.5% of the claim amt. over Rs. 5,00,000/-

Above Rs. 20,00,000/- & upto Rs. 1,00,00,000/-

Rs. 97,500/+ 3% of the claim amt. over Rs. 20,00,000/-

Above Rs. 1,00,00,000/- & upto Rs. 10,00,00,000/-

Rs. 3,37,500/+ 1% of the claim amt.overRs. 1,00,00,000/-

Above Rs. 10,00,00,000/- & upto Rs. 20,00,00,000/-

Rs. 12,37,500/+.75% of the claim amt.overRs.1,00,00,000/

Above Rs. 20,00,00,000/- Rs. 19,87,500/- + 0. 5% of the claim amount over & above Rs. 20,00,00,000/- with a ceiling of Rs. 30,00,000/- For Sole Arbitrator, an additional amount of 25% of the above.

7. Counter statement within scope of reference

• Submission of Counter Claims: No separate reference required to be given to arbitral tribunal either by appointing authority or the Court. {Sec. 23(2A)}

• Respondent may also submit a counter claim/set off within the scope of the arbitration agreement.

• Counter claim to be treated as being within the scope of reference.

• Condition: to fall within the scope of the arbitration agt. to avoid a separate/new reference by the respondent.

• In order to ensure final settlement of disputes between parties and prevent multiplicity of litigation.

• The Law of Limitation would however be attracted for counter claims.

8 (1). Scope of setting aside the awardEXISTING GROUNDS FOR SETTING ASIDE THE AWARD

• a party under some incapacity• Arb. Agt. not valid under the subject law• no proper notice of the appointment of an arbitrator or of the

arbitral proceedings• unable to present the case• disputes not contemplated by or not falling within the terms of

arbitration agreement. • decisions on matter beyond the scope of arbitration• tribunal or procedure not as per the agreement of the parties• the subject-matter not capable of settlement by arbitration under

the law• The award against the public policy of India, (unsafe & treacherous

ground for legal decision) i.e. • (a) induced or affected by fraud or corruption

8 (2). Scope of setting aside the award

• (b) violation of section 75 or section 81• Public policy further explained to include the following.• (c) is in contravention with the fundamental policy of Indian law

(won’t include review on the merits of the dispute.• (d) in conflict with the most basic notions of morality or justice.• (e) if patently illegal (in other than ICA) but not on the ground of

erroneous application of law or reappreciation of evidence.• Old. Sec. 28(3) In all cases, the arbitral tribunal shall decide in

accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transactions.

• Substituted: While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transactions.

8 (3). Scope of setting aside the award

• The awards were so far set aside if against any of the provisions of the contract even if unconscionable and against the trade practices e.g. no interest would be payable etc.

• [review based on the patent illegality std. set in ONGC Ltd.v. Saw Pipes Ltd. The proviso creates exceptions for erroneous application of the law and re-appreciation of evidence, which cannot be the basis for setting aside awards.]

• Application to be filed only after notice to other party.• Application to be disposed of within a period of one year

from the date of notice to the other party.

9. Removal of automatic stay of award

• Existing provision under sec.36 for enforcement: • The award shall be final subject to time for making an application to set

aside the arbitral award has expired, or the application has been refused.• Amended Sec. 36(1) time for making an application to set aside the

arbitral award has expired, then subject to-• Sec. 36(2) Where an application to set aside award has been filed, the

filing of such an application shall not by itself render the award unenforceable, unless a separate application made for that purpose & the Court grants stay of award in accordance with the provisions of sub-section(3)

• Sec. 36(3). Upon filing of the separate application under sub-section (2) for stay of the operation of the award, the court may, subject to such conditions as it may deem fit, grant stay of the operation of the award for reasons to be recorded in writing.

• Court shall have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure.

• As per CPC, if the decree is one for payment of money, the Court shall, if it grants stay without requiring security, record its reasons for so doing.

10. Interest on award

• Before amendment, As per Sec. 31(7) (a) the arbitral tribunal may include in the sum for which the award is made interest, at such rate, over any part, for any period from cause of action to date of award

• (b) unless the award otherwise directs, carry interest @ 18% p. a. from date of the award to the date of payment.

• Amended interest instead of 18% to interest at 2% p. a. higher than the current rate of interest from the date of award to date of payment.

• Expl.: “current rate of interest” shall have the meaning as per Cl (b) sec.2 of the Interest Act, 1978.

• NOTE: “sum” includes interest awarded in section 31(7)(a).• (as per decision of SC in Hyder Consulting (U.K.) v. Governor of Orissa • “current rate of interest” means the highest of the maximum rates at

which interest paid on different classes of deposits by different classes of scheduled banks in accordance RBI Banking Regulation Act

11 (1). Applicability of amendment (prospectively)

• New clause 26 introduced in the Act is as follows:• "26. Nothing contained in this Act shall apply to the arbitral

proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.”

• Section 21 of the Act: Commencement of arbitral proceedings- Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.

11 (2). Applicability of amendment (prospectively)

• The ongoing cases will have no time limit while the new cases will have to be completed in 12 months.

• However, the time limit for the arbitral award would start when all the arbitrators receive the notice, in writing, of their appointment.

• The conflict would arise when a subsequent dispute in an ongoing arbitration case is submitted to the respondent for adjudication which is closely connected with the ongoing arbitration case.

12. Link for the Presentation & Amendment Act.

• Presentation of Arbitration Act after Amendmenthttp://

www.slideshare.net/MaheshGupta19/a-c-1996-amdt-ordinance-56522055• THE ARBITRATION AND CONCILIATION (AMENDMENT) ACT,

2015 NO. 3 OF 2016 [31st December, 2015.]http://taxguru.in/wp-content/uploads/2016/01/Arbitration.pdf

http://www.slideshare.net/MaheshGupta19/a-c-1996-amdt-ordinance-56522055




http://taxguru.in/wp-content/uploads/2016/01/Arbitration.pdf

THE ARBITRATION AND CONCILIATION (AMENDMENT) ACT, 2015

Mahesh Kumar Gupta Executive Director (Railway)

Engineering Projects (India) [email protected]

THANKS

A & C (amdt) Act 2015 - Sept 2016

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Transcript of A & C (amdt) Act 2015 - Sept 2016