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Amendment to Arbitration and Conciliation Act, 1996

October 7, 2015

I. Introduction:

The rapid globalization of the Indian economy led to the enactment of new liberal policies and in turn India opened up to foreign investments in varied industries and sectors. But this came along with a disadvantage of increase in the number of commercial disputes.

But with time it was soon realized that India’s economic reforms will become effective only if the nation’s dispute resolution provisions are in tune with international regime and hence Arbitration and Conciliation Act 1996 (“Act”) was enacted.

II. Arbitration and Conciliation Act, 1996:

The main objective behind enforcing Arbitration and Conciliation Act, 1996 was to consolidate and amend the laws relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards. However, the Indian arbitration phase faced and is still facing lot of difficulties. Due to the inordinate delay in settling down the disputes, the high cost and other small inconveniences the Indian firms chose foreign locations and English law to settle down their disputes.

In light of the above problems faced by Indian firms, recently on August 26, 2015, the Union Cabinet under Prime Minister Shri. Narendra Modi has given its approval to the Arbitration and Conciliation (Amendment) Bill, 2015. This has been done taking into consideration the recommendations of the Law Commission and suggestions brought forth by the stakeholders.

III. Amendments:

The salient features of the amendments are as follows:

  1. It is proposed that when a person approaches for appointment as an 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.
  2. It is proposed to cap the duration of arbitration to twelve months. Further, the parties may extend such period up to six months. Thereafter, it can only be extended by the Court, on sufficient cause.
  3. It is proposed to fast track the procedure for arbitration, if the concerned parties agree. Awards in these cases shall be given within a period of six months.
  4. It is proposed that the term ‘public policy of India’ must be restricted as a ground for challenging the award to the cases where fraud or corruption is involved or the making of the award is against the fundamental policy of Indian Law or goes against the grain of morality or justice.
  5. It is proposed to insert a provision regarding application to challenge the award should be disposed of by the Court within one year.
  6. It is proposed to amend section 36 of the Act. According to the amendment an award can only be stayed where the Court passes any specific order on an application filed by the party.
  7. It is proposed that that the High Court or Supreme Court shall dispose of the appointment of an arbitrator as fast as possible and within a period of 60 days, if possible.
  8. It is proposed to provide comprehensive provisions for costs regime.
  9. It is proposed to empower the arbitral tribunal to grant all kinds of interim measures which the Court is empowered to grant, under section 9 of the Act and such order shall be enforceable in the same manner as if it is an order of Court.

IV. Conclusion:

Through these amendments, the Indian Government seeks to prevent the outsourcing of arbitration to other countries. Also, once these amendments are enforced the legal framework of Indian arbitration will become cost-effective and user friendly thus making it as a preferred means for the settlement of commercial disputes.


Disclaimer: The entire contents of this document have been developed on the basis of relevant information and are purely the views of the authors. Though the authors have made utmost efforts to provide authentic information however, the authors and the company expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.


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