Compare the judgements of Bhatia and Balco and what in your opinion is the correct law as laid down by SC

substantiate it with your own reasons. Secondly what in your opinion is the effect of new amendments to the

Arbitration Act and what way it will help India to become an International Arbitration Hub.

Guided By:

B. Gopalakrishnan

PREPARED BY:

SUNEETA MOHAPATRA

LLM, 1YEAR COURSE (3rd Trisem)

ROLL NO. 06

1

CONTENTS

Sl. No. Topic Pg No.

1.BHATIA INTERNATIONAL VS. BULK TRADING S. A. & ANR. 3-4

2.Bharat Aluminium Company and Ors. etc. etc. Vs. Kaiser Aluminium Technical Service, Inc. and Ors. etc.

5-7

4. Comparison between Bhatia international and BALCO Case. 8-11

5.Opinion on the correct law, laid down by SC with substantiate reasons.

12-13

6.

Opinion on the effect of new amendments to the Arbitration Act and in what way it will help India to become a international Arbitration Hub.

14-20

2

BHATIA INTERNATIONAL Vs. BULK TRADING S. A. & ANR.

Contract contained an arbitration clause which provided that arbitration was to be as per the

rules of the International Chamber of Commerce (ICC).

ISSUE:

 Whether Indian Courts have power to grant interim relief U/S 9 of the A&C Act 1996?

CONTENTIONS:

Appellant

1. Part I of the Act only applies to arbitrations where the place of arbitration is in India.

2. Framing the said Act the legislature has purposely not adopted art 1(2) of the

UNCITRAL Model Law. He submits that this clearly shows the intention of the

legislature that they did not want part I to apply to arbitrations which take place

outside India.

3. Sec 2(f) of the said Act defines an international commercial arbitration. International

commercial arbitration could take place either in India or outside India. If the

international commercial arbitration takes place out of India then part I of the said Act

would not apply.

4. When arbitration is being held in Paris i.e. out of India. To such arbitrations part I

does not apply. Sec 9 and 17 fall in part I. Therefore Sec 9 and 17 would not apply

and cannot be used in cases where the place of arbitration is not in India.

OPINION OF THE COURT:

The Court observed that accepting the arguments to the appellant amount to holding that the

legislature has left lacunae in the said Act. There would be a lacunae as neither part I or II

would apply to arbitrations held in a country which is not a signatory to the New York

Convention or the Geneva Convention (non-convention country). It would mean that there is

no law, in India, governing such arbitration. It also leads to an anomalous situation, inasmuch

part I would apply to Jammu and Kashmir in all international commercial arbitrations but part

I would not apply to the rest of India if the arbitration takes place out of India. Furthermore,

there can also be an apparent conflict between sub-s (2) of s 2 [CG1] on one hand and sub-ss

(4) and (5) of s 2 on the other. In addition to this sub-s (2) of s 2 would also be in conflict

with s 1 which provides that the Act extends to the whole of India. A party would be

3

left remediless inasmuch as in international commercial arbitration which take place out of

India the party would not be able to apply for interim relief in India even though the

properties and assets are in India. Thus a party may not be able to get any interim relief at all.

HELD:

1. A construction that results in hardship, serious inconvenience, injustice, absurdity or

anomaly or which leads to inconsistency or uncertainty and friction in the system

which the statute purports to regulate has to be rejected and preference should be

given to that construction which avoids such results.

2. The definition makes no distinction between international commercial arbitrations

held in India or outside India…The said Act nowhere provides that its provisions are

not to apply to international commercial arbitrations which take place in a non-

convention country.

3. There would also be an anomaly inasmuch as even if an international commercial

arbitration takes place outside India, part I would continue to apply in Jammu and

Kashmir, but it would not apply to the rest of India.

4. The wording of sub-s (2) of s 2 suggests that the intention of the legislature was to

make provisions of part I compulsorily applicable to an arbitration, including an

international commercial arbitration, which takes place in India. Parties cannot, by

agreement, override or exclude the non-derogable provisions of part I in such

arbitrations. By omitting to provide that part I will not apply to international

commercial arbitrations which take place outside India the affect would be that part I

would also apply to international commercial arbitrations held out of India. But by

not specifically providing that the provisions of part I apply to international

commercial arbitrations held out of India, the intention of the legislature appears to be

to ally parties to provide by agreement that part I or any provision therein will not

apply.

5. The opening words of ss 45 and 54, which are in part II, read ‘notwithstanding

anything contained in part I’. Such a non-obstante clause had to be put in because the

provisions of part I apply to part II.

6. The definition indicates that an award made in an international commercial arbitration

held in a non-convention country is also considered to be a domestic award’.

7. Thus s 28 does not provide for rules where the place of arbitration is out of India.

4

Bharat Aluminium Company and Ors. etc. etc. Vs.   Kaiser Aluminium Technical Service, Inc. and Ors. etc.

Introduction:

The long-awaited decision of the Indian Supreme Court in Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc was delivered on Thursday 6 September 2012. This landmark judgment, delivered by a five-judge constitutional bench, restricts the ability of local courts to interfere in international arbitrations seated outside India and overrules the controversial decision of Bhatia International v Bulk Trading S.A.

However, whilst the decision is likely to be largely welcomed by the international arbitration community, it is notable that the judgment only has prospective applicability and, as such, there is no doubt for the foreseeable future that Bhatia will continue to have an impact in commercial arbitrations where arbitration agreements have already been entered into.

A brief history:

In Bhatia, the Supreme Court considered a request for interim relief under Part I of the Indian Arbitration and Conciliation Act 1996 (the “Act”). Part I confers significant powers on Indian courts, including the ability to order interim measures and set aside awards. Even though Part I seemingly only applied to domestic arbitrations, the Supreme Court interpreted the Act in a manner that allowed Part I to be applied to foreign seated arbitrations, unless the parties opted out of this arrangement.

Later decisions entrenched the precedent set by Bhatia. For example, in Venture Global v Satyam Computer Services, the Supreme Court held that foreign awards could be set aside by Indian courts under section 34 of the Act (which falls under Part I) for violating Indian statutory provisions and being contrary to Indian public policy. It therefore set aside an LCIA award rendered by a tribunal seated in London. Furthermore, in Indtel Technical Services v W.S. Atkins Plc, the Supreme Court held that Indian courts could appoint arbitrators in arbitrations seated outside India. Decisions such as these have since been heavily criticised. Each gave further weight to the possibility of increased interference from Indian courts in foreign seated arbitrations, and were dispiriting for the international arbitration community, including Indian and foreign investors alike.

It is perhaps in light of such public criticism that there has been a growing trend amongst the Indian judiciary to restrict the applicability of Part I of the Act. Cases such as Videocon Industries v Union of India and Yograj Infrastructure v Ssang Yong Engineering have demonstrated the courts’ willingness to find an implied exclusion of Part I where a foreign

5

seat and foreign governing law have been chosen. As such, there has been a distinct move away from Bhatia and Indian court interference in recent years, paving the way for Bharat Aluminium and its final clarification on the issue.

Key implications of the Judgment:

Thursday’s Supreme Court ruling in the Bharat Aluminium case means that Indian courts will no longer be able to set aside awards or issue interim measures in respect of arbitrations seated abroad. This ends years of uncertainty for the international arbitration community and allows arbitration to be seen as a much more viable method for dispute resolution in India. The key favourable implications of the judgement are as follows:

The Supreme Court has confirmed that there can be no “overlapping or intermingling” of the provisions contained in Part I of the Act with the provisions contained in Part II (which relates to the enforcement of foreign awards).

Part I of the Act will have no application to international commercial arbitrations, seated outside India.

The seat or legal place of the arbitration is the “centre of gravity” in an international arbitration.

Awards rendered in commercial arbitrations seated outside India will only be subject to the jurisdiction of the Indian courts when they are sought to be enforced in India in accordance with the provisions contained in Part II of the Act.

The Indian courts cannot order interim relief under Section 9 or any other provision of the Act in support of foreign seated arbitrations. Parties will therefore need to rely on the relief afforded by the courts of the jurisdiction in which the arbitration is seated. As the choice of seat can have significant implications for the way an arbitration is conducted, parties should carefully consider their choice at the drafting stage.

However, rather disappointingly, the decision of Bharat Aluminium only applies to arbitration agreements entered into after 6 September 2012. It is not completely clear why this decision has been taken, as the judgment provides very little explanation, other than to say that it is to ensure “complete justice”.

Looking ahead:

The judgment is likely to be welcomed by the international arbitration community. It seems to restore the original intention of the Act and provides much needed certainty for those involved in Indian- related commercial contracts where arbitration is provided as the method of dispute resolution. It should also have a positive impact on the way in which India is viewed from an international arbitration perspective; providing parties with a greater

6

incentive to arbitrate rather than being forced to resort to the protracted litigation in Indian courts.

However, the fact that the judgment has only prospective applicability is likely to cause some concern for those who have already entered into arbitration agreements involving business or transactions in India. Since the earlier decision, experienced practitioners have been drafting arbitration clauses to exclude Part I of the Act. Where this has not been dealt with in clauses drafted before 6 September 2012 some uncertainty will remain.

Overall this is a positive development which should strengthen the Indian arbitration regime and put India on the map of arbitration friendly nations.

7

Comparison between Bhatia International and BALCO case:

The decision of the Constitutional Bench of the Supreme Court, in Bharat Aluminium Co v

Kaiser Aluminium Technical Service (“BALCO”), where the Supreme Court declared that

Part I of the Arbitration and Conciliation Act, 1996 (the “Act”) will not apply to arbitrations

conducted outside India, is likely to have an enormous impact not only on the arbitration and

commercial law jurisprudence in India but also on foreign investment flowing into India. In

brief, the issues involved in BALCO and why they are of such great significance, a

comparative analysis of the decisions in Bhatia International Case.

The reasons provided in Bhatia

case :

The counter in BALCO :

The word “only” was omitted from section

2(2) and such omission was not

unintentional. Such an omission would be

rendered redundant if the word “only” was to

be read in to the Section.

Relying on the discussions at the time of

drafting Article 1(2) of the Model Law, the

Supreme Court held that the use of “only”

was to ensure that the exceptions to Article

1(2) alone, i.e. Articles 8, 9, 35 & 36, had

extra territorial operation. Since Section 2(2)

of the Act, did not make any reference to

these exceptions, there was no requirement to

use the term “only”. Furthermore, the scheme

of the Act made it abundantly clear that the

Act was to only have territorial effect.

Section 1(2) states: “It extends to the whole

of India: Provided  that Parts I, III and IV

shall extend to the  State of Jammu and 

Kashmir  only in so far as they  relate  to 

international commercial arbitration or, as the

case may be, international commercial

conciliation.” The anomalous situation that

would arise if it was held that Part I only

The proviso is necessary to update the

Jammu and Kashmir Act, 1945, which does

not contain any provision relating to

International Commercial Arbitration. The

Proviso to Section 1(2) therefore incorporates

those provisions of the Arbitration and

Conciliation Act, 1996 which relate to

international commercial arbitrations into the

8

applies if the arbitration is held in India is

that Part I would apply to Jammu and

Kashmir with respect to all international

commercial arbitrations but Part I would not

apply to the rest of India if the arbitration

takes place out of India.

Jammu and Kashmir legislation. Owing to

Jammu and Kashmir’s special constitutional

status, all other aspects of arbitration in that

State are covered by a special statute

(originally the 1945 Act and now by the

Jammu & Kashmir Arbitration and

Conciliation Act, 1997).

Sections 2(4) and 2(5) state: “(4) This Part

except sub-section (1) of section 40, sections

41 and 43 shall apply to every arbitration

under any other enactment for the time being

in force, as if the arbitration were pursuant to

an arbitration agreement and as if that other

enactment were an arbitration agreement,

except in so far as the provisions of this Part

are inconsistent with that other enactment or

with any rules made thereunder. (5) Subject

to the provisions of sub-section (4), and save

in so far as is otherwise provided by any law

for the time being in force or in any

agreement in force between India and any

other country or countries, this Part shall

apply to all arbitrations and to all

proceedings relating thereto.” The reasoning

in Bhatia was that if Part I does not apply to

foreign arbitrations, there is a conflict

between Section 2(2) and Section 2(5), which

is made subject to Section 2(4) alone and not

Section 2(2).  Consequently, Section 2(2)

would have to be interpreted in such a

manner that it did not contradict Section 2(5).

Section 2(2) does not conflict with section

2(4) or with section 2(5). Section 2(5) only

means that the Act applies to all arbitrations

where it would be otherwise applicable.

Section 2(5) does not indicate that it would

apply to arbitrations which are not held in

India.

9

If Part I does not apply, an award of Tribunal

in a country that is party to neither the New

York nor the Geneva Convention will be

unenforceable in India because it is neither a

domestic or a foreign award, and this

“lacuna” could not have been intended by

Parliament.

The Parliament has intentionally not

provided a mechanism for enforcement of a

non-Convention award by not including such

an award within the definition of a “foreign

award” in Sections 44 and 53. That being so,

Courts cannot provide an enforcement

mechanism for such awards by deeming them

to be domestic awards. There is therefore no

lacuna that needs to be filled.

A party is entirely remediless if Part I does

not apply to arbitrations conducted outside

India as the party would not be able to apply

for interim relief in India even though the

properties and assets are in India. Thus a

party may not be able to get any interim relief

at all.

The parties will have a remedy before the

Courts at the seat of arbitration. Merely,

because this remedy may be onerous does not

mean that the party is left remediless. Since

the parties voluntarily chose the seat, they are

deemed to have voluntarily chosen the

consequences of such a selection. In

arguendo that the parties are left remediless,

that needs to be addressed by the Legislature

and not the Courts.

If Part I did not apply, there was no need to

have used the words “where the place of

arbitration is in India” in Section 28(1)

because if Part I does not apply when the seat

is abroad, neither will section 28.

The Supreme Court, while addressing this

argument held: “The section merely shows

that the legislature has segregated the

domestic and international arbitration.

Therefore, to suit India, conflict of law rules

have been suitably modified, where the

arbitration is in India. This will not apply

where the seat is outside India. In that event,

the conflict of laws rules of the country in

which the arbitration takes place would have

to be applied. Therefore, in our opinion, the

emphasis placed on the expression “where

the place of arbitration is situated in India”,

10

by the learned senior counsel for the

appellants, is not indicative of the fact that

the intention of Parliament was to give an

extra-territorial operation to Part I of the

Arbitration Act, 1996.”

Use of the phrase “notwithstanding anything

contained in Part I, or in the Code of Civil

Procedure, 1908”, in Section 45, which is

contained in Part II of the Act indicates that

Part I and Part II can apply concurrently in

certain situations and since Part II only

applies where the place of arbitration is

abroad, it would mean that Part I could apply

in certain situations where the place of

arbitration is foreign.

The Supreme Court held: “It appears that the

Parliament in order to avoid any confusion

has used the expression “notwithstanding

anything contained in Part I” out of abundant

caution, i.e., “ex abundanti cautela”.

11

Opinion on the correct law, laid down by SC with substantiate reasons:

The Constitutional Bench of the Hon'ble Supreme Court, on 6 September 2012 passed a path

breaking judgment regarding the future implications of foreign award and foreign arbitration

a jurisdiction of Indian Courts through Bharat Aluminum Co. v. Kaiser Aluminum Technical

Services Inc .The Court overruled its earlier decision given in Bhatia International v. Bulk

Trading S.A and Venture Global Engineering v. Satyam Computer Services ltd. and held that

Indian Courts does not have jurisdiction to interfere in arbitral proceedings held outside India.

This Judgment of the honorable Court was well received by the Legal scholars around the

world.

A two judge bench of the Supreme Court comprising of Justices Dipak Misra & P.C.Pant has

held that Bhatia [Bhatia International v Bulk Trading S.A] is applicable to the cases where

the arbitration agreement was entered before the pronouncement of its overruling judgment

i.e. BALCO v Kaiser [06/09/2012]. Notably, Bhatia had held that Part I of the Arbitration

Act, 1996 is applicable to arbitrations held outside India unless the parties have either

expressly or impliedly excluded the provisions of the Act. The brief facts pertaining to the

issue can be summarised as that an agreement was entered on 20/10/2010 between the

appellant and first respondent in respect of coal voyages from Indonesia to India. Addendum

to contract was executed on 03/04/2013. Disputes arose, arbitration proceedings were

initiated and eventually an award was passed. The appellant subsequently filed an application

u/s 9 of the Arbitration Act, 1996 in ADJ court for conditional order of attachment in which it

succeeded. The High Court however reversed the decision stating that Sec. 9 had a limited

application to arbitration taking place in India and cannot be applied to International

Commercial Arbitrations as held in BALCO. The main contention of the appellants was that

as there was no express exclusion, the jurisdiction of Indian courts cannot be ousted & that

the other aspect of implied exclusion has to be examined on the ‘presumed intention’ test and

the intention of the parties needs to be ascertained. The respondent however opposed this

stating that as per BALCO, as the seat of arbitration is London Indian Courts have absolutely

no jurisdiction to the matter. Thus, there were two main aspects requiring the bench’s perusal

12

Whether on basis of construction placed on the said clause in the agreement it can be

stated that the ratio laid down in Reliance Industries Case would be attracted instead

of Bhatia

Whether the execution of the addendum would attract BALCO and oust the

jurisdiction of Indian Courts.

The bench speaking through Justice Dipak Misra analyzed various decisions on applicability

of the 1996 Act to Arbitrations having seat and venue outside India and came to a conclusion

by calculating various clauses that based on the ‘Presumed Intention’ test, the parties

intended to keep the juridical seat of arbitration as London only and that it is a

proper/substantial clause and not a curial/procedural one. The implied exclusion principle as

stated in Bhatia was held to be applicable and though the High Court had approached the

issue from the angle of BALCO, the conclusion was correct. The appeal was thus disposed

off.

13

Opinion on the effect of new amendments to the Arbitration Act and in what way amendments will help India to become a international

Arbitration Hub:

In the past few years there have been significant developments to the Indian arbitration law, bringing the Indian arbitration regime closer to global standards. These include :

The restriction of the Indian court’s jurisdiction over foreign-seated arbitrations through the Supreme Court’s BALCO decision in 2012. 

The 2014 Law Commission report calling for extensive amendments to Indian arbitration law in light of the problems that “plague the present regime of arbitration in India”

The announcement of the government’s intention to amend and reform the Arbitration and Conciliation Act 1996 (Act) in August 2015.

Building on these developments, on 23 October 2015 the government promulgated an ordinance – the Arbitration and Conciliation (Amendment) Ordinance 20157 (Ordinance) – to amend the Act with immediate effect. The Arbitration and Conciliation (Amendment) Bill, 2015 (Bill) was passed by the Lok Sabha (India’s lower house of parliament) on 17 December 2015 and the Rajya Sabha (India’s upper house of parliament) on 23 December 2015. It was held to come into force from 23 October 2015, the date of the Ordinance.

India’s aspirations to become a major international centre of arbitration have long been hindered by its arbitration laws and their judicial interpretation. These developments signal a welcome change in approach. The provisions of the Bill closely follow the recommendations of the Law Commission and go a long way towards reforming Indian arbitration law.

The Indian Government promulgated the Arbitration and Conciliation (Amendment) Bill

2015 which was passed by the Lok Sabha on 17 December 2015 and the Rajya Sabha on 23

December 2015 to make arbitration a preferred mode for settlement of commercial disputes

by making arbitration more user-friendly and cost effective, hoping that that would lead to

the more expeditious disposal of cases. This, in turn, was intended to improve the ‘ease of

doing business’ in India and thereby instil confidence in investors who were previously wary

of choosing India as a seat of arbitration.

Law Minister D V Sadananda Gowda had said:

14

"The benefit of becoming international hub for arbitration is that it can bring several

opportunities to lawyers of the country either by becoming the panel lawyers or by

becoming part of arbitration process and the potential financial benefits are much

higher than in domestic cases,"

Some of the major changes and there effects are outlined below:

The first and foremost welcome amendment introduced by the ordinance is with

respect to definition of expression 'Court'. The amended law makes a clear distinction

between an international commercial arbitration and domestic arbitration with regard

to the definition of 'Court'. In so far as domestic arbitration is concerned, the

definition of "Court" is the same as was in the 1996 Act, however, for the purpose of

international commercial arbitration, 'Court' has been defined to mean only High

Court of competent jurisdiction. Accordingly, in an international commercial

arbitration, as per the new law, district court will have no jurisdiction and the parties

can expect speedier and efficacious determination of any issue directly by the High

court which is better equipped in terms of handling commercial disputes.

Amendment of Section 2(2):   A proviso to Section 2(2) has been added which

envisages that subject to the agreement to the contrary, Section 9 (interim measures),

Section 27(taking of evidence), and Section 37(1)(a), 37(3) shall also apply to

international commercial arbitrations, even if the seat of arbitration is outside India,

meaning thereby that the new law has tried to strike a kind of balance between the

situations created by the judgments of Bhatia International and Balco v. Kaiser. Now

Section 2(2) envisages that Part-I shall apply where the place of arbitration is in India

and that provisions of Sections 9, 27, 37(1) (a) and 37 (3) shall also apply to

international commercial arbitration even if the seat of arbitration is outside India

unless parties to the arbitration agreement have agreed to the contrary.

Amendment to Section 8: (Reference of parties to the dispute to arbitration):  In

Section 8, which mandates any judicial authority to refer the parties to arbitration in

respect of an action brought before it, which is subject matter of arbitration agreement

. The sub-section(1) has been amended envisaging that notwithstanding any judgment,

decree or order of the Supreme Court or any court, the judicial authority shall refer the

parties to the arbitration unless it finds that prima facie no valid arbitration agreement

exists. A provision has also been made enabling the party, who applies for reference

15

of the matter to arbitration, to apply to the Court for a direction of production of the

arbitration agreement or certified copy thereof in the event the parties applying for

reference of the disputes to arbitration is not in the possession of the arbitration

agreement and the opposite party has the same.

Amendment to Section 9 (Interim Measures):  The amended section envisages that

if the Court passes an interim measure of protection under the section before

commencement of arbitral proceedings, then the arbitral proceedings shall have to

commence within a period of 90 days from the date of such order or within such time

as the Court may determine. Also, that the Court shall not entertain any application

under section 9 unless it finds that circumstances exist which may not render the

remedy under Section 17 efficacious.

The above amendments to Section 9 are certainly aimed at ensuring that parties

ultimately resort to arbitration process and get their disputes settled on merit through

arbitration. The exercise of power under Section 9 after constitution of the tribunal

has been made more onerous and the same can be exercised only in circumstances

where remedy under Section 17, appears to be non-efficacious to the Court concerned.

Amendment to Section 11 (Appointment of Arbitrators) : In so far as section 11,

"appointment of arbitrators" is concerned, the new law makes it incumbent upon the

Supreme Court or the High Court or person designated by them to dispute of the

application for appointment of arbitrators within 60 days from the date of service of

notice on the opposite party.

As per the new Act, the expression 'Chief Justice of India' and 'Chief Justice of High

Court' used in earlier provision have been replaced with Supreme Court or as the case

may be, High Court, respectively. The decision made by the Supreme Court or the

High Court or person designated by them have been made final and only an appeal to

Supreme Court by way of Special Leave Petition can lie from such an order for

appointment of arbitrator. The new law also attempts to fix limits on the fee payable

to the arbitrator and empowers the high court to frame such rule as may be necessary

considering the rates specified in Fourth Schedule.

Amendment to Section 12:  Amendment to Section 12, as per the new law makes the

declaration on the part of the arbitration about his independence and impartiality more

onerous. A Schedule has been inserted (Fifth Schedule) which lists the grounds that

would give rise to justifiable doubt to independence and impartiality of arbitrator and

the circumstances given in Fifth Schedule are very exhaustive. Any person not falling

16

under any of the grounds mentioned in the Fifth Schedule is likely to be independent

and impartial in all respects. Also, another schedule (seventh schedule) is added and a

provision has been inserted that notwithstanding any prior agreement of the parties, if

the arbitrator's relationship with the parties or the counsel or the subject matter of

dispute falls in any of the categories mentioned in the seventh schedule, it would act

as an ineligibility to act as an arbitrator. However, subsequent to disputes having

arisen, parties may by expressly entering into a written agreement waive the

applicability of this provision. In view of this, it would not be possible for

Government bodies to appoint their employees or consultants as arbitrators in

arbitrations concerning the said Government bodies.

Amendment to Section 14 : Amendment of Section 14 aimed at filling a gap in the

earlier provision, which only provided for termination of mandate of the arbitrator. If

any of the eventualities mentioned in sub-section (1) arises. The new law also

provides for termination of mandate of arbitration and substitution and his/her

substitution by another one.

Amendment to Section 17 (Interim Measures by Arbitral tribunal):  The old Act

had lacunae where the interim orders of the tribunal were not enforceable. The

Amendment removes that lacunae and stipulates that an arbitral tribunal under Section

17 of the Act shall have the same powers that are available to a court under Section 9

and that the interim order passed by an arbitral tribunal would be enforceable as if it is

an order of a court. The new amendment also clarifies that if an arbitral tribunal is

constituted, the Courts should not entertain applications under Section 9 barring

exceptional circumstances.

Amendment to Section 23 : The new law empowers the Respondent in the

proceedings to submit counter claim or plead a set-off and hence falling within the

scope of arbitration agreement.

Amendment to Section 24 : It requires the arbitral tribunal to hold the hearing for

presentation of evidence or oral arguments on day to day basis, and mandates the

tribunal not to grant any adjournments unless sufficient causes shown. It further

empowers the tribunal the tribunal to impose exemplary cost where adjournment

Insertions of new Section 29A and 29B( Time limit for arbitral award and Fast

Track Procedure)   : To address the criticism that the arbitration regime in India is a

long drawn process defying the very existence of the arbitration act, the Amended Act

envisages to provide for time bound arbitrations. Under the amended act, an award

17

shall be made by the arbitral tribunal within 12 months from the date it enters upon

reference. This period can be extended to a further period of maximum 6 months by

the consent of the parties, after which the mandate of the arbitrator shall terminate,

unless the Court extends it for sufficient cause or on such other terms it may deem fit.

Also, while extending the said period, the Court may order reduction of fees of

arbitrator by upto 5% for each month such delay for reasons attributable to the

arbitrator. Also, the application for extension of time shall be disposed of by Court

within 60 days from the date of notice to the opposite party.

The Ordinance also provides that the parties at any stage of arbitral proceeding may

opt for a fast track procedure for settlement of dispute, where the tribunal shall have

to make an award within a period of 6 months. The tribunal shall decide the dispute

on the basis of written pleadings, documents and submissions filed by the parties

without oral hearing, unless the parties request for or if the tribunal considers it

necessary for clarifying certain issues. Where the tribunal decides the dispute within 6

months, provided additional fees can be paid to the arbitrator with the consent of the

parties.

Amendment to Section 25 : The new Act empowers the tribunal to treat Respondent's

failure to communicate his statement of defence as forfeiture of his right to file such

statement of defence. However, the tribunal will continue the proceedings without

treating such failure as admission of the allegations made by the Claimant.

Amendment to section 28 : The new law requires the tribunal to take into account the

terms of contract and trade usages applicable to the transaction. In the earlier law, the

arbitral tribunal was mandated to decide disputes in accordance with the terms of the

contract and to take into account the trade usages applicable to the transaction. To that

extent, the new law seeks to relieve the arbitrators from strictly adhering to the terms

of the contract while deciding the case. However, the arbitrator can still not ignore the

terms of the contract. Therefore, the new amendment seems to bring in an element of

discretion in favour of the arbitrators while making of an award.

Amendment to Section 31 : This provides for levy of future interest in the absence of

any decision of the arbitrator, on the awarded amount @2% higher than current rate of

interest prevalent on the date of award. The current rate of interest has been assigned

the same meaning as assigned to the expression under Clause (b) of Section 21 of the

Interest Act, 1978.

18

In addition, the new Act lays down detailed parameters for deciding cost, besides

providing that an agreement between the parties, that the whole or part of the cost of

arbitration is to be paid by the party shall be effective only if such an agreement is

made after the dispute in question had arisen. Therefore, a generic clause in the

agreement stating that cost shall be shared by the parties equally, will not inhibit the

tribunal from passing the decision as to costs and making one of the parties to the

proceedings to bear whole or as a part of such cost, as may be decided by the tribunal.

Amendment of Section 34 (Limiting the gamut of Public Policy of India):  As per

the new amendment, an award passed in an international arbitration, can only be set

aside on the ground that it is against the public policy of India if, and only if, – (i) the

award is vitiated by fraud or corruption; (ii) it is in contravention with the

fundamental policy of Indian law; (iii) it is in conflict with basic notions of morality

and justice. The present amendment has clarified that the additional ground of

"patently illegality" to challenge an award can only be taken for domestic arbitrations

and not international arbitrations. Further, the amendment provides that the domestic

awards can be challenged on the ground of patent illegality on the face of the award

but the award shall not be set aside merely on the ground of an erroneous application

of law or by re-appreciation of evidence. The new Act also provides that an

application for setting aside of an award can be filed only after issuing prior notice to

the other party. The party filing the application has to file an affidavit along with the

application endorsing compliance with the requirement of service of prior notice on

the other party. A time limit of one year from the date of service of the advance notice

on the other parties has been fixed for disposal of the application under Section 34.

Significantly, there is no provision in the new Act which empowers the court or the

parties to extend the aforesaid limit of one year for disposal of the application under

Section 34.

Amendment to Section 36 (Stay on enforcement of award):   The Ordinance

provides that an award would not be stayed automatically by merely filing an

application for setting aside the award under Section 34. There has to be a specific

order from the Court staying the execution of award on an application made for the

said purpose by one of the parties. The Ordinance aims to remove the lacunae that

existed in the previous Act where pending an application under Section 34 for setting

aside of arbitral award, there was an automatic stay on the operation of the award. The

new law also empowers the Court to grant stay on operation of arbitral award for

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payment of money subject to condition of deposit of whole or a part of the awarded

amount.

Amendment to Section 37:  Under Section 37(1), the new law makes provision for

filing of an appeal against an order of judicial authority refusing to refer the parties to

arbitration under Section 8.

As regards enforcement of certain foreign awards, the new law seeks to add

explanation of Sections 48 and 57 thereby clarifying as to when an award shall be

considered to be in conflict within public policy of India. The parameters are the same

as are provided under Section 34. Similarly, the expression "Court" used in Sections

47 and 56 have been defined to mean only the High Court of competent jurisdiction.

Conclusion:

The amendment brought to the 1996 Act is certainly a positive step towards making

arbitration expeditious, efficacious and a cost effective remedy. The new amendments seek to

curb the practices leading to wastage of time and making the arbitration process prohibitively

a costly affair. The new law also makes the declaration by the arbitrator about his

independence and impartiality more realistic as compared to a bare formality under the

previous regime. Making the arbitrator responsible for delay in the arbitration proceedings,

for the reasons attributable to him, would ensure that the arbitrators do not take up

arbitrations, which are beyond their capacities. Such a deterrent would imbibe self-discipline

and control amongst the arbitrators. It can be said that the present amendments certainly

travel an extra mile towards reducing the interference of the Court in arbitration proceedings

that has been a consistent effort of the legislature since passing of the 1996 Act.

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