Note on the Arbitration and Conciliation (Amendment)

Act, 2015

The key changes made by the 2015 Amendment Act are:

1. The definition of “court” in Section 2 has been amended to mean only to a

High Court in the case of International Commercial Arbitration.
The provisions for granting Interim relief (Section 9), Court assistance in
taking evidence (Section 27) and Appeals (specifically, clause (a) of sub-
section (1) and sub-section (3) of section 37) shall from now on also be
applicable to international commercial arbitrations.
2. The provision for setting aside an award on grounds of public policy has been
modified (narrowed) to include those awards that are i) in contravention with
the fundamental policy of Indian law or ii) in conflict with the notions of
morality or justice, in addition to the grounds already specified in the Act.
3. The Act of 2015 has imposed strict time limits for the conclusion of arbitral
process and requires the arbitral tribunal to make its award within 12 months,
which can be further extended to a period of 6 months. If the award is made
within 6 months, the arbitral tribunal will receive extra fees. However if the
award is delayed beyond the specified time because of the arbitral tribunal, the
fees of the arbitral tribunal will be reduced by up to five percent (5%) for each
month of delay.
4. The parties to arbitration can also choose to conclude the proceeding in a fast
track manner. The award in such a proceeding would be granted within six (6)
months.
5. Any challenge to an arbitral award must be disposed off within a period of 1
year.
6. Section 17 has been amended wherein the arbitral tribunal has been given the
same powers to pass interim measures as the court and an order of the tribunal
under this section shall be enforced in accordance with the provisions of the
Code of Civil Procedure, 1908 in the same manner as it was an order of the
court.
7. The Act of 2015 confers upon the Supreme Court or High Court powers to
appoint an arbitrator on application made by the parties. In an event of such an
 application being made, the court should expediently dispose of such
application within 60 days.
8. Section 36 in the Act of 1996 has been substituted by a new Section 36
wherein if the time for making an application to set aside an arbitral award has
elapsed, then such an award shall be enforced in accordance with the
provisions of the Code of Civil Procedure, 1908 in the same manner as it was
a decree of the court. However, filing of an application to set aside an arbitral
award shall not render the award unenforceable unless the court grants an
order to stay the operation of the said arbitral award.

Two most important Amendments:

 Amendment of Section 34 (Limiting the ground 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 payment
of money subject to condition of deposit of whole or a part of the awarded
amount.

The Applicability of the Amendments to Pending Arbitration Proceedings:

1. The Supreme Court has given clarity on the said issue by way of its judgment
Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. The question
before the court was whether the 2015 amendments to the provisions of the
Arbitration Act would apply to arbitrations or arbitration-related court
proceedings that already existed on the date of coming into force of the
amendment i.e. 23 October 2015.
2. In a nutshell the Supreme Court has held that the amendments to the Act will
apply to (a) arbitral proceedings (before the arbitral tribunal) commenced on
or after the date of the amendments coming into force; and (b) application
(arbitration-related court proceedings) filed on or after the amendment came
into force, even where the arbitral proceedings were commenced before the
amendments came into force.
3. The reasoning behind Supreme Court’s decision- Supreme Court was clear
that the amendments to the Arbitration Act are prospective and not
retrospective however the court did not use the word “prospective” per se. The
Supreme Court. The Supreme Court made a bifurcation between arbitral
proceedings and court proceedings in relation to arbitral proceedings. The
court held that arbitration-related court proceedings would not be viewed as a
continuation of arbitral proceedings, but would be viewed separately.
4. Effect of the decision- Section 34 of the Arbitration Act permits an aggrieved
party to challenge an arbitral award by filing a petition in court. Before the
amendment of the Arbitration Act, the filing of a Section 34 petition
automatically led to a stay on the court proceedings for execution of the
arbitral award under Section 36 of the Arbitration Act. This automatic stay on
the award on filing an objection has been amended by the 2015 amendment
act. The Amendment Act requires that a separate application be filed to seek a
stay of execution proceedings. This application may require a deposit to be
made, and will only be granted at the discretion of the court instead of being
routinely applied (as was the case before).
5. The Supreme Court decision means that even for pending arbitration
proceedings commenced before the amendments to the Arbitration Act were
brought into force, the amended provisions of the Section 36 of the Arbitration
Act will apply. In other words, even if arbitration had already started before
the amendments were enacted, no automatic stay will apply if an application is
filed challenging the award in such proceedings. The Supreme Court has even
gone so far as to say that the amended provisions of Section 36 should apply
even where an application under Section 34 has been filed before the
Arbitration Act was amended.