“Don't ever take a fence down until you know the reason it was put up.

-G. K. Chesterton

Introduction

The Arbitration and Conciliation (Amendment Act), 2021 (“2021 Amendment”) is the latest
step taken by the Central Government in making India an arbitration hub. The 2021
Amendment was passed by both the houses of the Indian bicameral parliament on 10 March
2021, repealing the Arbitration and Conciliation (Amendment) Ordinance, 2020 promulgated
on November 4, 2020, by the President of India.

This article discusses the two changes brought by the 2021 Amendment i.e., the changes to
the Section 36 and the removal of the Eighth Schedule from the principal act. The authors
criticise Section 36(3) as it first, poses a problem with the element of evidence; second,
conflicts with the Code of Civil Procedure; third,

For the amendment to Section 43J, the authors discuss the intention behind insertion of the
Eighth Schedule, the benefits obtained from its removal, and provide suggestions which can
be kept in mind during the drafting of the new regulations.

Evidence

Another problem arising from the amendment is with regard to evidence. The Section says
that to obtain an unconditional stay a prima facie case must be made out but remains silent as
to the aspect of evidence i.e., whether new ones can be brought in or not. Now here are 2
situations- first, new evidence cannot be recorded and second, new evidence can be recorded.
Let us discuss these 2 scenarios in detail.

I. New evidence cannot be recorded.

If this interpretation is taken then it would be in consonance with the 2019 amendment, in
which the words “furnishes proof” in Section 34 were substituted with “establishes on the
basis of the record of the arbitral tribunal”,1 thus, explicitly barring any novel evidence to be
brought before the Court. This leaves Section 36 equivalent to Section 34(2)(b)(ii) with a
wider scope.

II. New evidence can be recorded.

1
Section 34
If this interpretation is taken, then the applicant party is able give new evidence to present its
case. In a particular case, let us assume that a prima facie case of fraud or corruption was
proved, and the stay is granted. Now the question is whether this evidence can be used for
setting aside the award? If it is answered in affirmative then this creates a loophole to Section
34(2)(b)(ii), as the applicant party can bring in new evidence under the veil of Section 36(3).
On the other hand, if the evidence cannot be used then whilst the applicant party will be able
to prove serious fraud to obtain the stay, they would fail in getting the award set aside which
sounds counter-intuitive and would inevitably lead in miscarriage of justice.

Conflict with CPC

The proviso to Section 36 states that a Court while considering the application for grant of
stay in the case of an arbitral award must have due regard to the provisions of the Code of
Civil Procedure (“CPC”),2 Order 41 Rule 5(3) of which laid down the following 3 conditions
which had to be satisfied to obtain an order for stay of execution—

(a) that substantial loss may result to the party applying for stay of execution unless the
order is made;
(b) that the application has been made without unreasonable delay; and
(c) that security has been given by the applicant for the due performance of such decree
or order as may ultimately be binding upon him.3

But now with the 2021 Amendment, mere proving of a prime facie case will entitle the party
to an “unconditional” stay, thereby removing any discretion which would have been required
to balance the competing equities on a case-to-case basis. Moreover, the 2021 Amendment
includes new grounds of ‘fraud’ and ‘corruption’ which are not explicitly mentioned in the
CPC. These additional grounds separate civil proceedings from arbitral proceedings as in the
latter the party has a much wider scope to contest its case. This discrimination has also been
observed in Hindustan Construction Company v. Union of India,4 where the Supreme Court
noted-

“The anomaly, therefore, of Order XLI Rule 5 of the CPC applying in the case of full-blown
appeals, and not being applicable by reason of Section 36 of the Arbitration Act, 1996 when
it comes to review of arbitral awards, (where an appeal is in the nature of a rehearing of the
original proceeding, where the chance of succeeding is far greater than in a restricted
2
Section 36
3
Order XLI Rule 5(3), CPC
4
Hindustan Construction Company v. Union of India
review of arbitral awards under Section 34), is itself a circumstance which militates against
the enactment of Section 87[…] .”5

Schedule VIII

The Arbitration and Conciliation (Amendment Act), 2019 (“2019 Amendment”) was lauded
for taking a step forward in institutionalizing arbitration in India and realising the dream
showed by the 2015 Amendment. Amongst others, it introduced the Eighth Schedule based
on the recommendations of the report of the High-Level Committee under the Chairmanship
of Justice B.N. Srikrishna6 (“Committee”) which was set up to review the institutionalization
of arbitration mechanism in India. It found that many stakeholders perceived the poor quality
of domestic arbitrators and the lack of professionalism amongst arbitrators as a problem
affecting the growth of arbitration in India. 7 For this, the Committee recommended the
creation of a pool of young, qualified, experienced, and well-trained arbitrators through
accreditation, which will also act as a reliable standard for parties wishing to appoint
arbitrators.

Though the intention was good, nevertheless, it was criticised the Schedule specified nine
criteria which stated, inter alia, that only those persons who are an advocate, or a chartered
accountant, or a cost accountant, or a company secretary, or an engineer, practicing under the
Indian law for at least 10 years are qualified to be appointed as an arbitrator. This effectively
resulted in the disqualification of foreign arbitrators from being accredited under the Act.

This posed two problems, first, it restricted party autonomy as the parties were barred from
appointing a foreign national to adjudicate, which in cases could be guarantee neutrality of
arbitrators in a domestic arbitration; and second, it discouraged foreign parties from opting
for Indian institutional arbitration as their choice of arbitrator was limited by nationality,
likelihood of lack of specialization and experience in handling international arbitrations.

Fortunately, these concerns have been directly addressed by 2021 Amendment, at it

completely removes the Eighth Schedule from the Act and substitutes Section 43J with “The
qualifications, experience and norms for accreditation of arbitrators shall be such as may be
specified by the regulations.” This prima facie removes the basic requirement of being an
experienced professional under the Indian system, however, remains silent about the nature of

5
Hindustan Construction Company v. Union of India, para 50
6
https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf
7
https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf
these “regulations.” As in who will be making these “regulations” and the date of their
release.

As accreditation of arbitrators is paramount and will enhance the faith of the stakeholder, it
becomes imperative that these regulations be drafted promptly with utmost care, keeping in
mind the accreditation norms adopted by international accreditation institutions such as the
Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Resolution
Institute, and the British Columbia Arbitration and Mediation Institute. Some of these norms,
which can serve as a benchmark for these “regulations”, are experience, 8 professional
education,9 professional and moral standing,10 qualifying examinations,11 peer interviews/
assessments by a panel of approved arbitrators, 12 and continuing professional development
(“CPD”) requirements.13 Moreover, it is suggested that scholars, practitioners, and key
stakeholders be consulted in finalizing these regulations to prevent any further controversy.14

8
For instance, CIArb mandates that to become a member, the applicant must have five years’ experience in
arbitration, construction adjudication or mediation in a lead/sole capacity; including settlement agreements, the
management of proceedings, and attending hearings which have resulted in the publication of a reasoned award
or decision and have been a party representative in at least five (5) arbitrations/mediations/adjudications,
available at https://www.ciarb.org/membership/routes-to-membership/.
9
For instance, see the educational requirements for the Singapore Institute of Arbitrators membership, available
at https://siarb.org.sg/index.php/membership/categories.
10
See ‘Criteria & Application Procedure’, Hong Kong International Arbitration Centre website, available at
http://www.hkiac.org/arbitration/arbitrators/criteria-application.
11
For instance, CIArb mandates that to become a member, the applicant must have completed Module 1 training
and assessment components on one of CIArb’s Pathways, and the completion of CIArb’s Accelerated Route to
Membership (ARM) Programme or an equivalent course, available at https://www.ciarb.org/membership/routes-
to-membership/.
12
See Section 7 of the Policy for the Registration of Practising Arbitrators of the Resolution Institute, available
at https://www.resolution.institute/documents/item/2306.
13
See CPD Points Guidelines of the SIArb, available at http://siarb.org.sg/index.php/panel-ofarbitrators/cpd-
points-guidelines.
14
http://arbitrationblog.kluwerarbitration.com/2019/08/25/the-2019-amendment-to-the-indian-arbitration-act-a-
classic-case-of-one-step-forward-two-steps-backward/