Decoding the Recent Amendments in the Arbitration and Conciliation Act, 1996

One important piece of Indian law that has revolutionized conflict resolution through mediation, conciliation, arbitration, and negotiation is the Arbitration and Conciliation Act, of 1996. It is by Section 89 of the Code of Civil Procedure, 1908, and Article 39A of the Indian Constitution. The Act strongly emphasizes respect for foreign awards, party autonomy, and minimal court involvement. The 2015 Amendment created the Arbitration Council of India (ACI), decreased judicial interference, enhanced neutrality in arbitrator appointments, and instituted time-bound hearings. However, the Act encounters difficulties with definition clarity, the expansion of institutional arbitration, the function of arbitrators, cost considerations, enforcement issues, and the encouragement of mediation and conciliation. Continuous reforms and execution, such as public awareness campaigns, fortifying institutional arbitration structures, and promoting international cooperation, are required to realize its full potential. Virtual arbitrations have the potential to improve the process efficiency and accessibility.

Alternative Dispute Resolution (ADR) is a mechanism for resolving conflicts outside the intricacies of the judicial system. It entails private conflict settlement before a third-party expert, resulting in binding rulings. Mediation, conciliation, and negotiation are the methods that ADR (Alternative Dispute Resolution) possesses. These approaches conform to fairness, legal assistance, and expeditious trial, as Article 39A of the Constitution of India stipulated.  ADR (Alternative Dispute Resolution) was endorsed by section 89 of the Code of Civil Procedure, 1908. ADR proceedings are adaptable, and innovative, and yield satisfactory resolutions at a lower expense and duration. The Parliament enacted the Arbitration and Conciliation Act, of 1996, to resolve this matter.[1]

The Arbitration and Conciliation Act, of 1996, is an Indian statute governing arbitration, modeled after the UN model law and consistent with UNCITRAL’s framework. It aims to unify and update laws relating to arbitration within the country, arbitration in international commercial matters, arbitration awards from other countries, as well as mediation procedures, are recognized and enforced. The Act was established to rectify the absence of a definitive framework in arbitration processes in India, which stemmed from the phrases ‘Panch’ and ‘Panchayat’. Amendments were enacted in 2015 and 2019 to diminish judicial participation in arbitration procedures.[2]

The Arbitration Act of 1899 was the first which was based on England’s Act of Arbitration of 1899. The Arbitration Act, of 1940 was enacted and enforced on 1 July 1940 and amended in 1996, to consolidate the law that relates to arbitration. United Nations Commission on International Trade  on June 21, 1985 adopted a model law that is ‘UNCITRAL’. This model law has been accepted for implementation. The statute of 1996 was further changed in the years 2015, 2019, and 2021.

The Arbitration and Conciliation Act of 1996 was enacted in India to expedite the resolution of commercial disputes via private arbitration. It includes national and international enforcement of foreign arbitral verdicts.  Arbitration is frequently regarded as more economical than court proceedings, owing to its cost-efficiency and the option to appoint a qualified arbiter. Both international and traditional arbitration are dealt with by the act, nonetheless, it lacks a precise definition. The Law Commission of India recommends defining domestic arbitration as arbitration originating through legal agreements, whether they be contractual or not when no parties are an individual, body corporate, association, or government of an outside country. The Act highlights the role of parties’ domicile and nationality in determining whether a dispute is domestic or international.[3]

OBJECTIVES AND CHARACTERISTICS OF THE ARBITRATION AND CONCILIATION ACT:

Main objectives of the act:

• Traditional and international arbitration and conciliation methods are covered.
• Fair, efficient, and capable arbitration process.
• For an arbitral award, reasons must be given by the arbitral tribunal.
• It must be noted that the arbitral tribunal must perform its functions within a defined or prescribed jurisdiction.
•  To ensure the role of courts is diminished or minimal in the matter of arbitral process.
• To ensure that each arbitral award is implemented identically as if it were a decision of the court

CHARACTERISTICS OF ARBITRATION and CONCILIATION ACT:

Arbitration rules govern voluntary agreements between parties to settle disputes before or after they occur. A neutral arbiter oversees the procedure, providing a binding decision. Parties can adopt their procedural norms and laws. Conciliation laws have a non-binding process, with the outcome not binding unless there is agreement from both the parties to settle the dispute. The conciliator encourages communication and helps to a mutually agreeable conclusion. Confidentiality is a vital aspect, barring the use of disclosed material in subsequent judicial procedures, enabling honest and open discussions.[4]

MATTERS THAT ARE ARBITRABLE AND NON-ARBITRABLE:

Parties who agree to use arbitration as a private dispute resolution process designate an arbitral tribunal to hear their case. The 2019 modification allows an award to be made by the arbitral tribunal within 12 months, which can be extended by the parties’ consent. The concept of ‘arbitrability’ encompasses three key aspects: determining if a dispute can be resolved through arbitration, assessing whether the issue is included in the arbitration agreement or belongs to the ‘excepted matters’ that are excluded from arbitration, and confirming whether the parties involved have opted to refer the dispute for arbitration. Non-arbitrability issues might be addressed before a court, during arbitration processes, or a challenge to the award or enforcement.[5]

The arbitrability of disputes has been the subject of multiple rulings by the Indian Supreme Court. The court concluded in Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. & Others (2011)[6] The type of rights at issue determines whether a dispute is arbitrable. Arbitration can resolve disputes involving rights in personam, such as those against particular people, as opposed to rights in rem, such as those against the entire world. Tenancy or eviction problems, criminal charges, guardianship concerns, marriage disputes, insolvency and winding up processes, testamentary matters, and other conflicts were specified by the court as being outside the scope of arbitration. According to Justice AM Spears’s decision in Himangani Enterprises v. Kamaljeet Singh Ahluwalia[7], landlord-tenant issues are not subject to arbitration because they conflict with laws.[8]

PROCESS OF ARBITRATION IN INDIA:

Drafting an arbitration clause, getting a notice of arbitration, choosing arbitrators, filing a statement of claim, and hearing from the parties are all steps in the arbitration process in India. Arbitration is a method of settling disputes stated in the ruling of the Supreme Court of India, through the selection of an arbitrator who is mutually agreeable to both parties. When the parties cannot agree on the procedure or establish an arbitral tribunal, they can pursue the remedy outlined in Section 11 after responding to the notification within a set amount of time.

If the parties are unable to agree, they must move to court and seek an appointment. The case is made using written documents, arbitration agreements, in-person presentations, and telephone calls.[9] The steps involved in arbitration proceedings are as follows: initiating the arbitration; selecting an arbitrator; holding preliminary meetings; filing statements of claims and other pleadings; holding hearings; framing the issues for determination; exchanging evidence through affidavits; deposing witnesses; and making an award.[10]

PROCESS OF CONCILIATION IN INDIA:

Conciliation is considered sa non-adjudicatory alternative conflict resolution process under the Arbitration and Conciliation Act, 1996 (26 of 1996)[11]. Parties send each other written invitations, which must be accepted within 30 days. Parties can designate arbitrators, with a presiding arbitrator also possible. A written statement must be submitted to the conciliator. The conciliator can meet with the parties, conduct proceedings, and modify the process based on the case’s circumstances. With permission, administrative support may be requested. Parts 67(3) and 69(1) of the legislation provide detailed procedures.[12]

KEY PROVISIONS OF THE 2021 AMENDMENT OF THE ARBITRATION AND CONCILIATION ACT:

There was a repletion of the Arbitration and Conciliation (Amendment) Ordinance, 2020, in March 2021, by the Arbitration and Conciliation (Amendment) Act, 2021. The amendment brought about two noteworthy modifications to the Act, one of which was the provision that Additionally, there would be an absolute stay on the implementation of the award in the event, that a contract, arbitration agreement, or award-making procedure proved to be a of a prima facie case of deception or corruption.

In addition, Schedule VIII—which listed the education and experience prerequisites for serving as an arbitrator in India—was removed and the Arbitration Council of India was given the authority to determine eligibility for arbitrators.[13]

The 2021 Amendment adds a clause to section 36(3) allowing a party to contest an arbitral ruling if they believe it was influenced by corruption or fraud. Additionally, the amendment permits the nomination of a foreign national arbitrator, guaranteeing that the individual has the necessary training and experience to effectively and efficiently manage complicated technical disputes in the construction sector. This modification guarantees the court will maintain the award indefinitely until the challenge is settled.[14]

In N. Radhakrishnan v. Maestro Engineers[15], the Supreme Court decided that cases involving malpractice and fraud cannot be sent to arbitration. A partner in a partnership firm, the appellant made accusations of fraud, malpractice, conspiracy, and forgery of the company’s books to benefit himself. Following their acceptance of his offer of retirement, the respondents reorganized the partnership. The respondents rejected the appellant’s Section 8 application to submit the matter to arbitration, claiming that the original partnership agreement was no longer relevant and that fraud and malpractice claims would render arbitration incompetent.[16]

CONCLUSION:

The Arbitration and Conciliation Act, of 1996 has been amended substantially to bring it in line with international standards and to make India a center of commercial continent. Recent amendments especially 2021 amendments are to expedite arbitration, minimise judicial intervention, and fairness in the conduct of proceedings. These reforms pertain to corruption, mediator mandate, and time frame rules that enforce an effective arbitration procedure. The current Act, on the other hand, has served to corrode public confidence in arbitration as a true alternative, not to litigation but as a last resort. Yet serious challenges persist — with non-arbitrable matters and issues on independence and impartiality being the more notable of such concerns. These reforms will need to be applied and supported by the courts uniformly if India is to ever realize its goal of becoming one of the global centers for international arbitration.

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[1] Sneha Mahawar, ‘Arbitration and Conciliation Act, 1996’ [2022] iPleaders https://blog.ipleaders.in/arbitration-and-conciliation-act-1996/ .

[2] Diganth Raj Sehgal, ‘The Arbitration and Conciliation Act, 1996 : An Overview – IPleaders’ (iPleaders13 January 2021) https://blog.ipleaders.in/arbitration-conciliation-act-1996-overview/  accessed 21 September 2024.

[3]AARUSHI DHINGRA, ‘ARBITRATION and CONCILIATION ACT,1996-an OVERVIEW’, SSRN Electronic Journal (2020) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3582896 accessed 21 September 2024.

[4] Mridula Sharma, ‘Arbitration and Conciliation Laws, Importance and Features’ (PHYSICS WALLAH10 June 2024) https://www.pw.live/exams/ca/arbitration-and-conciliation-laws/ accessed 21 September 2024.

[5] Vijay K Singh, ‘The Viewpoint: Arbitrability and Non-Arbitrability of Disputes’ (Bar and Bench – Indian Legal news18 August 2021) https://www.barandbench.com/law-firms/view-point/the-viewpoint-arbitrability-and-non-arbitrability-of-disputes  accessed 21 September 2024.

[6] AIR 2011 SC 2507.

[7] AIR 2017 SC 5137.

[8] Advocate Sapna and Prashant Kanha, ‘Arbitrable and Non-Arbitrable Disputes’ (RED LAW20 October 2022) https://redlaw.in/arbitrable-and-non-arbitrable-disputes/ accessed 21 September 2024.

[9] Subodh Asthana, ‘Arbitral Process under Arbitration and Conciliation Act, 1996’ (iPleaders13 March 2020) https://blog.ipleaders.in/arbitral-process/ .

[10] Kamal Kumar, ‘The Arbitration and Conciliation Act, 1996: An Overview’ (26 July 2015) https://icmai.in/upload/PPT_Chapters_RCs/Jaipur/Jaipur_26072015.pdf  accessed 21 September 2024.

[11] Arbitration and Conciliation Act, 1996.

[12] Akshaya K, ‘Procedure for Conciliation | via Mediation Centre’ (viamediationcentre.org) https://viamediationcentre.org/readnews/MjA0/Procedure-for-Conciliation  accessed 21 September 2024.

[13] Ganesh Chandru, Aditi Sheth and Hrithik Merchant, ‘The 2021 Amendment to Arbitral Legislation in India: Is It a Step in the Right Direction?’ (2021) 7 National Law School Business Law Review 7 https://repository.nls.ac.in/cgi/viewcontent.cgi?article=1099&context=nlsblr   accessed 21 September 2024.

[14] Prateek Jain, ‘Recent Amendments in Indian Arbitration and Conciliation Act: The Winds Have Begun to Blow for the Resolution of Complex Construction Disputes’ (Daily Jus – Your daily dose of arbitration and legal industry insights28 April 2024) https://dailyjus.com/world/2024/04/recent-amendments-in-indian-arbitration-and-conciliation-act-the-winds-have-begun-to-blow-for-the-resolution-of-complex-construction-disputes  accessed 21 September 2024.

[15]  AIR 2010 SC (SUPP) 307.

[16] Sneha Mahawar, ‘EC Arbitration 2021 : Amendment of Arbitration Act – IPleaders’ (iPleaders30 March 2022) https://blog.ipleaders.in/ec-arbitration-2021-amendment-of-arbitration-act/  accessed 21 September 2024.

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