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BoardofEditors

TheArbitrationandConciliation
(Amendment)Act,2015

(inalphabeticalorder)

Devesh Juvekar

AdvisoryCouncil
BishwajitBhattacharyya
C.R.Dua
DiljeetTitus

Dikshat Mehra

and
comment on the pros and cons of the
recently passed amendments to the
ArbitrationAct.

HemantBatra
JohnCallagy
K.K.Lahiri
K.S.Bagga
LalitBhasin
Dr.LindaS.Spedding
MartinRogers
M.L.Sarin
Prof.V.S.Mani
RajivAtmaram
RajivK.Luthra
RajivNayar

Editors
GitanjaliSaraf
VikramadityaRai
SagarS.P.Singamsetty

Founder&ManagingEditor
VikrantPachnanda

INTRODUCTION

The Governments efforts to improve Indias rank on the index of ease of doing
businessandeaseofdisputeresolutionareaimedatimprovingthebusinessclimate
of the country. The promulgation of the Arbitration and Conciliation (Amendment)
Ordinance,2015amendingcertainprovisionsoftheArbitrationandConciliationAct
1996, was a step towards providing ease of dispute resolution in India. Now, with
theArbitrationandConciliation(Amendment)Act,2015("ACT")beingpasseditwill
help in revamping the dispute resolution mechanism in India, boosting in turn the
confidence of domestic and foreign businesses investments in India and making
India a preferred seat of arbitration. Some of the key amendments to the Act are
highlightedbelow.
COURTININTERNATIONALARBITRATIONANDAPPLICABILITYOFPARTIOFTHE
ACTTOFOREIGNSEATEDARBITRATION.

UndertheAct,Court,incaseofinternationalcommercialarbitration,meanstheHigh
CourtinexerciseofitsordinaryoriginalciviljurisdictionandinCourtswhereordinary
originalciviljurisdictionisnotpresentitmeanstheHighCourthavingjurisdictionto
hearappealsfromsubordinateCourts1.PartIoftheActappliestoarbitrationswhere
seatisinIndia.Also,unlessacontraryagreementisenteredbetweenparties,interim
measures by Court, Court assistance in taking evidence and appeals from order
granting or refusing interim measures by Courts will also be applicable to a foreign
seatedarbitration.
VALIDAGREEMENTBYELECTRONICMEANS

Anarbitrationagreementcontainedintheformofcommunicationthroughelectronic
meansisnowtobetreatedasavalidarbitrationagreement2. This brings the Act in
conformitywith
1.Section2(e)oftheAct.
2.Section7(4)(b)oftheAct.

AssociateEditors
NainaPachnanda
ShashankManish
VishwamJindal
ApurvKumarMishra

EditorialTeam

theUNCITRALModelLaw. 3
NARROWEDSCOPEOFINTERVENTIONBYJUDICIALAUTHORITY

A judicial authority is required to refer the parties to arbitration unless it finds that
prima facie no valid arbitration agreement exists4. Where the original arbitration
agreement or its certified copy is not available with a party applying for arbitration,
suchpartycancallupontheotherpartytoproducethesamebyfilinganApplication
alongwith the copy of the arbitration agreement. Further, an order refusing to refer
the parties to arbitration is now appeal able under the Act5. This will expedite the

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ConferenceCorner

mattertobereferredtoarbitration.

InternshipCorner

INTERIM MEASURES BY THE COURT TO BE FOLLOWED BY COMMENCEMENT OF

ARBITRATIONPROCEEDINGS

ScholarshipCorner

Where any order for interim protection has been passed by a Court under the Act
prior to the commencement of the arbitration proceedings, the arbitration
proceedingshavetocommencewithinaperiodofninetydaysfromthedateofsuch
orderorsuchfurthertimeastheCourtmaydetermine6.Oncethearbitraltribunalhas
been constituted, Court will not entertain an application for interim measure unless
the Court finds that the remedy provided under interim measures before the arbitral
tribunalmaynotbeefficacious.Thiswillencouragemattersbeingreferredtoarbitral
tribunalinanexpeditedmannerandreducejudicialinterference.
INTERIM MEASURES BY THE COURT TO BE FOLLOWED BY COMMENCEMENT OF
ARBITRATIONPROCEEDINGS

Where any order for interim protection has been passed by a Court under the Act
prior to the commencement of the arbitration proceedings, the arbitration
proceedingshavetocommencewithinaperiodofninetydaysfromthedateofsuch
orderorsuchfurthertimeastheCourtmaydetermine.Oncethearbitraltribunalhas
been constituted, Court will not entertain an application for interim measure unless
the Court finds that the remedy provided under interim measures before the arbitral
tribunalmaynotbeefficacious.Thiswillencouragemattersbeingreferredtoarbitral
tribunalinanexpeditedmannerandreducejudicialinterference.
APPOINTMENTOFARBITRATOR

Incaseofinternationalcommercialarbitration,thepowertoappointanarbitratoris
nowwiththeHonbleSupremeCourtofIndiainsteadofrespectivedesignatedChief
Justices7. An application for appointment of arbitrator is to be disposed as
expeditiously as possible and an endeavour is to be made to dispose of the matter
withinaperiodofsixtydaysfromthedateofserviceofnoticetotheoppositeparty
and scope of inquiry for appointment under the Act has been confined to
examinationoftheexistenceofanarbitrationagreementonly.Thiswill
3.UnitedNationsCommissiononInternationalTradeLaw
4.Section8oftheAct
5.Section37oftheAct
6.Section9oftheAct
7.Section11oftheAct

helpinresolvingalongpendingconcernwithrespecttoappointmentofarbitrator,
which currently takes about eighteen months to twentyfour months. No appeal
(including a Letters Patent Appeal) will lie against a decision of the Court under
appointment. Brief guidelines are provided under the Act to determine whether the
circumstances exists which give rise to justifiable doubts as to the independence or
impartiality of an arbitrator. Broad disclosures are to be made by the arbitrator and
Act provides that any person whose relationship, with the parties or counsel or the
subject matter of the dispute, falls under any of the categories as specified in the
fifthscheduleoftheActshallbeineligibletobeappointedasanarbitrator.Thesaid
disclosuresareinternationallyacceptedprinciplesandawelcomestepinensuringthe
independenceofthearbitrator
DISCLOSURESOFINTERESTBYARBITRATOR

An obligation has been cast upon the prospective arbitrator to make an express
disclosure on circumstances, which are likely to give rise to doubts regarding his
independence or impartiality or grounds, which may affect his ability to complete
the arbitration within twelve months. Schedule seven to the Act contains a detailed
listastowhatwouldgiverisetodoubtsabouttheindependenceofthearbitratoror
impartiality8. Schedule seven of the Act lists the circumstances in which a person
wouldbeineligibletoactasanarbitratordespiteanypriorcontracttothecontrary.
Partiescan,however,waivethesaidprovisionsrelatingtoineligibility,bymakingan
expressagreementinwritingafterthedisputeshavearisen.Thesaidrequirementsare
now in consonance with the guidelines provided under the International Bar
Associationonconflictofinterestininternationalarbitration.
ENFORCEABILITYOFINTERIMMEASURESBYTHEARBITRALTRIBUNAL

ThearbitraltribunalnowhaspowerundertheActtograntinterimmeasures,which
are similar to those of the Court9. Such interim measures can be granted by the
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arbitral tribunal during the arbitral proceedings or at any time after making the
arbitral award, but before it is enforced under the Act10. Interim orders passed by
arbitralwouldbeenforceableundertheCodeofCivilProcedure,1908("CPC") as if
itwereanorderofthecourt.Thearbitral
8.Section12oftheAct
9.Section17oftheAct
10.Section36oftheAct

Thearbitraltribunalwillhavethepowertoorderthefollowinginterimmeasures:
appointmentofaguardianforaminororpersonofunsoundmind
measures protecting goods, or amount of money, or property which is subject
matterofthedisputeand
nterim injunction or appointment of receiver and such other measures for
protection.
The said amendments will solve the long pending issue and confusion on the
arbitrators powers to grant interim reliefs and will enable parties to obtain
efficaciousremedybeforethetribunal.
PROSPECTIVEAPPLICABILITYOFTHEACTTOARBITRALPROCEEDINGS

TheActistogovernprospectivelytoallarbitralproceedingscommencedonorafter
October23,2015 11. Prospective applicability of the Act would be limited to arbitral
proceedings and not to court proceedings and the Act cannot be extended to
include post arbitration proceedings, when the award is passed before the
commencement of the Act. The Honble Madras High Court its recent judgment of

NewTirupurAreaDevelopmentCorporationLtd.v.M/sHindustanConstructionCo.
Ltd12.hasdealtwiththeaforesaidandhasheldthattheActisnotapplicabletopost

arbitralproceedingsandaseparateapplicationneedstobefiledundertheActsoas
tostayenforcementproceedingspendingchallengeofanarbitralaward13.
COUNTERCLAIMBYRESPONDENTUNDERTHEACT

AprovisionhasbeeninsertedintheActallowingtherespondentto,insupportofhis
case,submitacounterclaimorpleadsetoffwhichistobeadjudicateduponbythe
arbitraltribunal. 14
RULESAPPLICABLEFORMAKINGOFTHEAWARDUNDERTHEACT

The arbitral tribunal is to take into account the terms of the contract and trade
usages
11.Section26oftheAct
12.ApplicationNo.7674of2015inO.P.No.931of2015.
13.Section36(2)oftheAct
14.Section12oftheAct

The arbitral tribunal is to take into account the terms of the contract and trade
usagesapplicabletothetransactionwhiledecidingandmakinganaward. 15
TIMEBOUNDARBITRATIONSANDFASTTRACKPROCEDURE

The arbitral tribunal is required, as far as possible, to hold daytoday hearings for
evidence or oral arguments and not grant an adjournment without sufficient cause.
The arbitral tribunal is to make the award within twelve months from the date the
arbitraltribunalhasreceivednoticeinwritingofitsappointment.Thepartiesmay,by
consent,extendtheaforesaidperiodbysixmonths.
If the award is not made within the said period of eighteen months, then the
mandateofarbitratorwillgetterminatedi.e.anewarbitratorneedstogetappointed
unless,theCourtextendstheperiod,priortoorafterexpiryofthesaidperiodonan
application by a party, and if such delay is due to the arbitrator or tribunal as the
case may be then the Court may order reduction of fees of the arbitrator by an
amount not exceeding five percent for each month of such delay. Further, the Act
mentions that in case of such termination of the arbitrator by Court, the arbitral
tribunal reconstituted shall conduct the proceedings from the stage already reached
by the earlier arbitrator. The intention here is to conduct arbitral proceedings in an
expeditious manner. However, only time will tell whether these changes will
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practicallywork.
To encourage speedy disposal of the arbitration proceedings, the arbitral tribunal is
entitled to receive additional fees as the parties may agree, provided the award is
madewithinsixmonthsoftheinitiationofthearbitrationproceedings.Theparties
may, prior to or at the time of appointment of the arbitral tribunal, agree to a fast
track procedure where the arbitral tribunal will consist of a sole arbitrator, who will
decidethedisputeonbasisofwrittenpleadings,documentsandsubmissionsfiledby
thepartieswithoutanyoralhearing(oralhearingmaybeheldifallpartiesrequestor
arbitraltribunalconsidersitnecessary).Theawardistobemadewithinaperiodof
sixmonths. 16
RATE OF INTEREST, WHEN AWARD IS SILENT AND PROVISIONS REGARDING
COMPUTATIONOFCOSTUNDERTHEACT
15.Section36oftheAct
16.Section29oftheAct

An amount awarded by the arbitral tribunal will, unless otherwise specified by the
arbitraltribunal,carryinterestat2%p.a.morethanthecurrentrateofinterest,from
the date of the award to the date of payment. This amendment has been done to
keep in mind that the earlier rate of interest 18% was too high and needed checks
andbalancesforthesame.Computationofcosttobeawardedtothepartiesunder
the Act are to include factors like conduct of parties, whether frivolous counter
claims are made, whether reasonable offer to settle dispute is refused by any party,
etc. 17Thesaidamendmentswillensurethatfrivolousarbitrationsarenotfiledandin
turnthiswillexpeditetheentirearbitralprocess.
SCOPEOFPUBLICPOLICYLIMITEDANDTIMEBOUNDDISPOSALOFCHALLENGETO
AWARD

The Act seeks to restrict the challenge to an award on the ground of public policy
onlyonthefollowinggrounds:
a.making of an award was induced or affected by fraud or corruption or was in
violationofconfidentiality
b.award is in contravention of fundamental policy of Indian law which does not
entailareviewonmeritsofthedisputeor
c.awardisinconflictwiththemostbasicnotionsofmoralityorjustice.
TheawardcanalsobesetasideiftheCourtfindsthattheawardisvitiatedbypatent
illegality appearing on the face of the award. A petition under this Act for setting
asidetheawardistobefiledbyapartyonlyafterissuingapriornoticetotheother
party. The party serving the petition needs to file an affidavit stating that the said
compliancehasbeendone.SuchPetitiontosetasidetheawardistobedisposedof
by the Court within a period of one year. This is a welcome change in the said
amendment, which talks about the issuance of prior notice which will enable the
otherpartytoavoidanyorderspassedagainstthemwithoutbeingheard 18.
NO AUTOMATIC STAY ON ENFORCEMENT OF AWARD BY FILING PETITION TO
CHALLENGETHEAWARD
17.Section31oftheAct
18.Section34andSection48oftheAct

Mere filing of an application to set aside an award will not itself render the award
unenforceable. Party seeking stay on operation of an award, is required to file
separate application for the same. Further, prescribed period under the Act to
challengetheawardisthreemonthsafterpartyreceivestheawardwhichcanextend
forthirtydaysifsufficientcauseisshownbutnotthereafter.If,theawardrendered
is not challenged by either of the parties within the aforesaid statutory period, the
awardwillthenbeenforceable..Inouropinion,thefilingofsuchanapplicationmay
be deterrent factor for the party so as to avoid any frivolous litigation and can also
amount to imposing costs as discussed above. The Court, while considering the
application for grant of stay in case of an arbitral award, may direct the party to
deposit,theamountdisputedorfurnishsuchsecurityinrespectthereofastheCourt
maythinkfitundertheprovisionsofCPC19.
ARBITRATION V/S THE COMMERCIAL COURTS, COMMERCIAL DIVISION AND
COMMERCIAL APPELLATE DIVISION OF HIGH COURTS ACT, 2015 ("

COMMERCIAL

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The definition of Commercial Disputes is very wide and essentially covers every
commercialtransactionincludinggeneralcommercialcontracts,shareholderandjoint
venture agreements, intellectual property rights, contracts relating to movable and
immovable property, natural resources etc. 20 of a Specified Value or such higher
value,asmaybenotifiedbytheCentralGovernment21.
Commercial Act provides that all applications and appeals arising out of an
internationalcommercialarbitrationandoutofdomesticarbitrationofsuchSpecified
Value that have been filed in the High Court having original jurisdiction shall be
heard by the Commercial Division (single judge). Appeals from such Commercial
DivisionwillbeheardanddisposedoffbytheCommercialAppellateDivisionandany
such applications and appeals arising out of a domestic arbitration other than
international commercial arbitration of such Specified Value would lie before any
principalcivilcourt(otherthanaHighCourt)whichwillbeheard
19.Section36oftheAct.
20.Asdefinedinsection2(c)oftheCommercialAct
21.Asdefinedinsection2(i)oftheCommercialAct.

anddisposedofbyaCommercialCourtexercisingterritorialjurisdiction.Inourview,
the appeal from such Commercial Appellate Division orders may lie to the Honble
SupremeCourtofIndia.However,thesaidappealprovisiontotheHonbleSupreme
CourtofIndiaisnotspecificallymentionedintheCommercialAct.
Followingistheflowcharttounderstandtheabove:

In case of arbitration which is below the Specified Value, following would be the
hierarchyoftheCourtswherepetition/appealswouldlie:

CONCLUSION

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InIndia,itistruethatarbitrationprocessismuchpreferredoverlitigation,astrials in
Courts take significantly longer due to huge pendency. However, over the last few
years,theprocess of arbitration in particular in ad hoc domestic disputes had come
to look more like the traditional court proceedings in India, which included issues
likehighcosts,enforceabilityoforderspassedbyarbitratorsetc.therebymakingfast
disposal of a matter through arbitration a myth. The aforesaid amendments are no
doubt a positive approach, specially, the powers given to Tribunal to enforce its
ordersasiftheyareordersofcourt,fixedschedulefeesofthearbitrator,timelimit
forarbitrationetc.WehopethattheamendmentsintheActwouldplayakeyrolein
concluding the arbitration process expediently thereby making India as a preferred
seatofarbitration.

DEVESHJUVEKAR&DIKSHATMEHRAarelawyersworkingwithRajani&Associatesandmaybe
reachedatdevesh@rajaniassociates.netanddmehra@rajaniassociates.net.

2007IndiaLawJournalPermissionandRights|Disclaimer

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