The Cabinet gave its nod to ordinances to amend the Arbitration and Conciliation Act and bring into force the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015 for expeditious settlement of commercial disputes that would improve ease of doing business in the country.
The latter would enable setting up of commercial benches in high courts for expeditious resolution of disputes, while the former is aimed at making India a favourable place to settle disputes through arbitration.
The amendments, based on the recommendations of the Law Commission, would also put various timelines for order of arbitration panel. For instance, a new provision would be inserted that application to challenge the award is to be disposed of by the panel within one year.
Ten, there would be a change in the existing law to the effect that mere filing of an application for challenging the award would not automatically stay execution of the award. The award can only be stayed where the court passed any specific order on an application filed by the party.
The salient features of the Arbitration And Conciliation (Amendment) Act 2015 are as under:
The amendment include specifying and restricting the term ‘Public Policy of India’ on whose ground an arbitral award could be challenged. An award would be construed as against the Public Policy of India if it is induced or affected by fraud or corruption, or is in contravention of the fundamental policy of Indian law or is in conflict with the most basic notions of morality or justice.
(i) In order to ensure neutrality of arbitrators, it is proposed to amend Section 12 to the effect that when a person is approached in connection with possible appointment of arbitrator, he shall disclose in writing about existence of any relationship or interest of any kind, which is likely to give rise to justifiable doubts. Further, if a person is having specified relationship, he shall be ineligible to be appointed as an arbitrator.
(ii) Insertion of a new provision that the Arbitral Tribunal shall make its award within a period of 12 months. Parties may extend such period up to six months. Thereafter, it can only be extended by the Court, on sufficient cause. The Court while extending the period may also order reduction of fees of arbitrator(s) not exceeding five percent for each month of delay, if the court finds that the proceedings have been delayed for reasons attributable to the arbitral tribunal. If the award is made within a period of six months, arbitrator may get additional fees if the parties may agree.
(iii) It is proposed to insert a provision for fast track procedure for conducting arbitration. Parties to the dispute may agree that their dispute be resolved through fast track procedure. Award in such cases shall be given in six months period.
(iv) Amendment of Section 34 relating to grounds for challenge of an arbitral award, to restrict the term ‘Public Policy of India” (as a ground for challenging the award) by explaining that only where making of award was induced or affected by fraud or corruption, or it is in contravention with the fundamental policy of Indian Law or is in conflict with the most basic notions of morality or justice, the award shall be treated as against the Public Policy of India.
(v) A new provision to provide that application to challenge the award is to be disposed of by the Court within one year.
(vi) Amendment to Section 36 to the effect that mere filing of an application for challenging the award would not automatically stay execution of the award. Award can only be stayed where the Court passed any specific order on an application filed by the party.
(vii) A new sub-section in Section 11 to be added to the effect that an application for appointment of an Arbitrator shall be disposed of by the High Court or Supreme Court as expeditiously as possible and an endeavour should be made to dispose of the matter within 60 days.
(viii) A new Section 31A is to be added for providing comprehensive provisions for costs regime. It is applicable both to arbitrators as well as related litigation in Court. It will avoid frivolous and meritless litigation/arbitration.
(ix) Section 17 is to be amended for empowering the Arbitral tribunal to grant all kinds of interim measures which the Court is empowered to grant, under Section 9 and such order shall be ‘enforceable in the same manner as if it is an order of Court.
Apart from above, amendments in Sections 2(1)(e) , 2(1)(f)(iii), 7(4)(b), 8(1) and (2), 9, 11, 14(1), 23, 24, 25, 28(3), 31(7)(b), 34 (2A) 37, 48, 56 and in Section 57 are also proposed for making the arbitration process more effective.
Salient features of The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill, 2015–
- Commercial dispute has been defined broadly to mean dispute arising out of ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, joint venture and partnership agreements, intellectual property rights, insurance and other areas, as per the proposal.
- Transfer of cases, mostly related to property disputes, to the district courts of the capital. The law will enhance the pecuniary jurisdiction of civil courts from the existing Rs 20 lakh to Rs 2 crore.
- Pecuniary jurisdiction refers to the jurisdiction of a court over a suit based on the amount or value of its subject matter. According to an estimate put before the Parliamentary committee which examined the bill, there are over 12,000 cases which will stand transferred to the lower courts.
- Commercial Divisions are to be set up in those high courts which are already exercising ordinary original civil jurisdiction such as Delhi, Bombay, Calcutta, Madras, and Himachal Pradesh high courts.
- Commercial Divisions will exercise jurisdiction over all cases and applications relating to commercial disputes. The Commercial Division shall have territorial jurisdiction over such area on which it has original jurisdiction.
- Commercial Courts which will be equivalent to district courts are to be set up in states and Union Territories where the high courts do not have ordinary original civil jurisdiction.
- Any appeal filed in a high court against the orders of certain tribunals like: (i) Competition Appellate Tribunal; (ii) Debt Recovery Appellate Tribunal; (iii) Intellectual Property Appellate Board; (iv) Company Law Board or the National Company Law Tribunal; (v) Securities Appellate Tribunal; and (vi) Telecom Dispute Settlement and Appellate tribunal may be heard by the commercial appellate division of the high court if it relates to a commercial dispute.