ARBITRATION AND CONCILIATION (AMENDMENT) ORDINANCE, 2020

[Mr. M. GOVINDARAJAN]

Ordinance

‘The Arbitration and Conciliation (Amendment) Ordinance, 2020 was promulgated by the President of India and published in Official Gazette on 04.11.2020. 

Object

The object to promulgate this ordinance is to-

• address the concerns by the stakeholders after the enactment of Arbitration and Conciliation (Amendment) Act, 2019; and
• ensure that all stakeholder parties to get an opportunity to seek unconditional stay of enforcement of arbitral awards

where the underlying arbitration agreement or contract or making of the arbitral award are induced by fraud or corruption.

Since the Parliament is not in session and the President is satisfied that the circumstances exist which render it necessary for him to take immediate action, the ordinance was promulgated by the President of India.

Enforcement of arbitral award

The Ordinance inserted a proviso to the proviso the section 36(3) of the Arbitration and Conciliation Act, 1996. 

Section 36 provides the procedure for enforcement of arbitral award.  Before 23.10.2015 section 36 provides that where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as it if were a decree of the Court.

Section 36 was substituted by Arbitration and Conciliation (Amendment) Act, 2016 which came into effect from 23.10.2015. 

The substituted section 36(1) provides that where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court. 

Section 36(2) of the Act provides that where an application to set aside the arbitral award has been filed in the Court under Section34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants and order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.

Section 36(3) provides that upon filing of an application for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing.

The proviso to section 36(3) provides that the Court shall, while considering the application for grant of stay of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure.

The Ordinance inserted a new proviso after the proviso to section 36(3) of the Act.  The newly inserted proviso provides that where the Court is satisfied that a prima facie is made on-

• that the arbitration agreement or contract which is the basis of the award; or
• the making of the award

was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award.

The insertion of the new proviso shall be deemed to have been inserted with effect from 23.10.2015.

The Ordinance gave clarification through ‘Explanation’ after the new proviso.  The explanation clarified that the above proviso shall apply to all court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015.

Amendment to section 43J

The Arbitration and Conciliation (Amendment) Act, 2019 introduced a new part viz., Part 1A which provides for the constitution of Arbitration Council of India and its powers and functions in the matter of arbitration.

Section 43J provides that the qualifications, experience and norms for accreditation of arbitrators shall be such as specified in the Eighth Schedule.    The Central Government may, after consultation with the Council, by notification in the Official Gazette, amend the Eighth Schedule and thereupon, the Eighth Schedule shall be deemed to have been amended accordingly. 

The Ordinance substituted a new section for the existing section 43J.  The newly substituted section 43J provides that the qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations.

Omission of Schedule Eight

The Eighth Schedule provides that qualifications and experiences for the appointment of an arbitrator in accordance with section 43J of the Act.  Since section 43J itself was amended the eight schedule was omitted by the Ordinance.