The Arbitration and Conciliation (Amendment) Act, 2015 ('Amendment Act') was passed by both houses of parliament in the winter session, pursuant to which it has received Presidential assent on 31 December 2015. The Act was notified in the Gazette of India on 1 January 2016 and has now come in to force.
On 23 October 2015, the Government of India through an executive action had promulgated the Arbitration and Conciliation Ordinance 2015 ('the Ordinance') bringing about large scale changes to the Arbitration and Conciliation Act, 1996 with the intention expediting the process and reducing court interference.
The Ordinance was welcomed but one of the contentious issue was whether it applied to fresh arbitrations or pending arbitration proceedings also. The Madras High Court in Delphi TVS Diesel Systems v Union of India W.P. No. 37355 of 2015 issued a notice to the Central Government seeking a clarification on whether the provisions of the Ordinance had a prospective or a retrospective application.
The Bombay High Court too in Kochi Cricket v BCCI issued notice to examine whether § 34 of the ordinance dealing with setting aside of domestic awards would be applicable to pending cases.
The Ordinance in the form of a bill was introduced in the Lok Sabha on 3 December 2015. The Lok Sabha while passing the bill has clarified that it will not apply to pending cases unless parties agree otherwise. A statement to this effect was made by the law minister Mr. Sadanand Gowda on 17 December 2015 while replying to a debate on the bill in the Lok Sabha, which passed the bill on the same day. Subsequently a clarification in the form of § 26 was introduced in the Amendment Act which settles the issue that unless the parties agree otherwise, the Amendment Act will not apply to arbitrations that were initiated prior to the commencement of this Amendment Act. § 1(2) of the Amendment Act states that it shall be deemed to be applicable from 23 October 2015. The bill was passed by the Rajya Sabha on 23 December 2015 without any debate.
Apart from this single change, the Ordinance in its transformation in to an Act, does not see any other changes. The Ordinance has now been effectively repealed, however § 27 of the Amendment Act, saves all actions undertaken by parties pursuant to the Ordinance. Therefore orders passed by the courts/tribunal, arbitrations commenced by parties and any other actions undertaken by parties under the Ordinance will be valid in law, despite its repeal.
The Amendment Act does not address other issues that were associated with the ordinance, for instance the ordinance does not expressly clarify whether disputes involving fraud and criminality are arbitrable.
The issue of parties approaching the court to seek an extension of time for completion of arbitration proceedings has not been addressed. § 29A of the Amendment Act provides the tribunal a total period of 12 months after completion of proceedings. The parties can agree to extend this period by 6 months. After this period the mandate of the tribunal is deemed to be terminated and court permission is required for extending this period.
Given the delays associated with domestic arbitration which is usually conducted in an ad hoc manner, the provision may lead to arbitration being blocked by unscrupulous parties on grounds that the period of 18 months has expired. It will also lead to court intervention pending arbitration proceedings a result which the Amendment Act seeks to avoid.
These issues will attract the attention of the courts in coming days and the rulings of the Indian Courts on these aspects are likely to be of particular interest. The passage of the bill though is an extremely important development and crystallises a number of important changes that were introduced by the Ordinance. The Amendment Act is likely to have a positive impact on the arbitration landscape, including improving India's image as an arbitration destination.
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