Amendments in Arbitration

Act
Amendments in Arbitration Act
• The foremost amendment done in the act is in the definition of the
“Court”.
• Now after the amendment there is distinction between the definition
of the court with respect to domestic arbitration seated in India and
foreign arbitration having seat outside India.
• In case of arbitration seated in India the definition of the “Court”
means the same as per 1996 Act, but in respect to International
Arbitration seated outside India, “Court” means only High Court of
competent jurisdiction. Now in cases of International Arbitration
seated outside India, District Court will have no jurisdiction and
parties can only go to High Court which who are better equipped to
deal with the issues of commercial contracts.
Amendments in Arbitration Act
• The legislation realizing the controversy created due to the
interpretation of section 2(2) of the act as it deviated from the model
law where the exceptions were provided for the extra territorial
application of A8, 9, 35 and 36. The parliament made the same
amendment in the arbitration Act, 1996 where the proviso is added
to section 2(2) which gives extra territorial jurisdiction to section 9,
27 and section 37(1) (a), 37(3).
Amendments in Arbitration Act
• Amendment done in section 8 (1) says that the parties to be referred
to arbitration agreement unless the courts find a prima facie case
that there is no valid arbitration agreement in which the dispute can
be resolved between the parties.
• Proviso to the section is also added which says that if a party applying
for reference of dispute to arbitration is not in possession of
arbitration agreement, Can apply to the court for a direction to
produce the arbitration agreement or its certified copy from the
opposite party.
Amendments in Arbitration Act
• Amendment made to Section 9, in Section 9(2) the court can pass
interim relief even before commencement of arbitration proceedings
but if the order is passed then the parties have to initiate the
arbitration proceedings within 90 days from the date of such order or
any such time as the court deems fit.
• In section 9(3) when the arbitration tribunal has been constituted
then the court shall not entertain application under section 9(1)
unless the court finds that there is no proper remedy under section
17.
Amendments in Arbitration Act
• Amendment done in Section 11 makes it necessary upon the
Supreme Court or the High Court or person or institute designated by
the court to dispose off the application made for appointment of the
arbitrator as soon as possible or maximum in 60 days period. The new
act also replaces “Chief Justice of India” and “Chief Justice of High
Court” with “High Court and “Supreme Court”, now the decision
made by them in respect to appointment of arbitrator is final and
appeal can be made to Supreme only by special leave petition. The
amendment in the section also provides for rule to be made by High
Court in regard to determination of fee and method of payment of
arbitration tribunal
Section 11 of Indian Arbitration and
Conciliation Act
• Appointment of Arbitrator –Section 11(3) talks about appointment by
the court in case parties fail to appoint arbitrator
• The default power of the court to appoint arbitrator is whether
Judicial or Administrative or Statutory in nature?
• K R Raveendrananthan v State of Kerala – A two judge bench of
court referred the matter to a larger bench as to whether the
function of the chief justice or his designate under S-11(4),(5),(6) is
judicial in nature. Before making the appointment can Chief justice
decide the jurisdictional objections with respect to the existence or
validity of the arbitration agreement
Sundaram Finance Ltd vs NEPC India Ltd
• The obiter observation that the function of the Chief Justice or his
designate under section 11 is “not judicial”, the court rightly did not
proceed to say that the function is of administrative nature. However
while affirming this observation, a two judge bench in Ador Samia(P)
Ltd. Vs. Peekay Holding Ltd. Stated that ‘as the chief justice or his
designate under section 11(6) acts in administrative capacity.. It is
obvious that this order is not passed by any court exercising any
judicial function nor is it a tribunal having the trapping of a judicial
authority’
Konkan Railway Corporation Ltd V Mehul
Construction Co.
• A three judge bench held that it is apparent that the order passed by
the chief justice or his nominee is an administrative order as has been
held by this court in the Ador Samia case.
• In Food Corporation of India Vs Indian Council of Arbitration, a two
judge bench of the court held that the ratio of the Mehul
Construction case is that the decision of the Chief Justice or his
nominee is merely an administrative order, the nature of the
function performed by them being essentially to aid the constitution
of arbitral tribunal immediately by appointing an arbitrator without
wasting time.
Konkan Railway Corporation Ltd v Rani
Construction Pvt Ltd
• The confusion about the order being an administrative order was reviewed
by high court in its writ jurisdiction. A five judge bench held that the order
of the CJ under section 11 nominating an arbitrator is not an adjudicatory
order and the CJ is not a tribunal, therefore, such an order cannot properly
be made the subject of a petition under A136, Affirming such an order is
not an adjudicatory order. Neither Ador Samia nor Mehul Construction
spelt out as to how it is an ‘administrative function’.
• The expression administrative order appears to have been loosely used in
place of ‘not judicial’
• The only function of the chief justice or his designate is to fill the gap left
by party to arbitration agreement, or by the two arbitrators appointed by
the parties and nominate an arbitrator
SBP & Co. v Patel Engineering
• The court overruled the earlier decision of the constitution bench in
the case of SBP & Co v Patel Engeering Ltd. The court overruled the
earlier decision of the constitution bench of five judges delivered in
Konkan Railways v Rani Construction. The court summed its
conclusion as –
• The power exercised by CJ of high court and CJI of India under 11(6) is
not an administrative power, rather it is a judicial power
2015 Amendment insertion of Section 11(6)A
• Duro Falguera SA v Gangavaran Port Limited – Section 11(6)A – the bench
observed that all that the courts needs to see is whether an arbitration
agreement exists – nothing more or less. The legislative policy and purpose
is to diminish the judicial interference in the appointment of arbitrator and
this intention as incorporated in Section 11(6A) of the Act.
• United Indian Insurance v Hyundai Engineering and Construction Co. Ltd
& Ors – the matter was decided contrary to section 11 6(a) of the Act, and
restoring law prior to amendment. Here the supreme court opined that an
arbitration clause needs to be interpreted strictly and the matter shall not
be referred to arbitration for a claim which the parties did not intent to
arbitrate. Court delved into the issue of arbitrability – which is an issues
which should not be considered by chief justice (as per Patel Engineering
Case and boghara polyfab)
Amendment in 2019 – Part 1A - Section - 43
• As per section 2(ca)- “Arbitral Institution” means an arbitral
institution designated by the Supreme Court or High Court under this
Act
• Section 43 talks about establishment and incorporation of Arbitration
Council of India, its composition, duties and functions
Amendments in Arbitration Act
• Amendment in Section 12 provides a schedule mentioning about the
disqualification of an arbitrator. Schedules points out the requirements of
an independent and impartial arbitrator and disclosure to be made
according to schedule sixth.
• Schedule seventh which deals with the relationship of the arbitrator with
the Parties under Section 29B can apply for fast track procedure for
speedier settlement of dispute where the tribunal shall have to make
award within six months. The tribunal may decide the dispute without oral
hearing on the basis of written pleadings, documents and submissions filed
by the parties. Oral hearing may be conducted on the request of the parties
or when the court deems fit. When the dispute is settled before six month
the act provides for additional fee for the arbitrator with the consent of the
parties.
Amendments in Arbitration Act
• Amendment done in Section 25, if the respondent fails to file his
statement of defence then it empowers the tribunal to treat it as
forfeiture his right to file such statement of defence, but the tribunal
will not treat such failure as submission to the allegation.
Amendments in Arbitration Act
• The amendment in section 28 was done after ONGC case, now the
tribunal needs to take into account the terms of the contract and
trade usage according to the transaction but the new law is not as
rigid as the old law, now the tribunal has an element of discretion
while making a award with respect to adhering to terms of the
contract.
Amendment in Arbitration Act
• Amendment in section 31 provides for future interest in the absent of
any decision by the arbitrator on the award which is 2% higher than
the rate prevailing rate.
Amendment in Arbitration Act
• Section 34 of the act which is used to set aside the arbitration award,
has been amendment is provides that the arbitral award can be set
aside when it is against the public policy of the country only when
the court finds out that the award was “passed due to fraud or
corruption, it is in contravention of fundamental policy of Indian
Law, it is in conflict with the most basic notions of morality and
justice. The amendment has also included the patent illegality clause
Amendment in Arbitration Act
• After the amendment done in Section 36 now merely filling
application under 34 would not render the award unenforceable. The
court shall order the stay of execution of the award on the separate
application made by the party on this behalf.
• Earlier there was an automatic stay on the operation of the award
while the application was pending under section 34. The new law
empowers the court to keep security before granting the stay of the
award.
Amendments in Arbitration Act
• Amendment made in section 37 makes a way for filling an appeal
against the judicial order which refuses the parties to refer to
arbitration agreement under section 8.
Amendments in Arbitration Act
• Amendment in section 48 and 57 is made thereby adding explanation
to public policy, clarifying the grounds in which the award is in
conflict with public policy of India. The parameters remain the same
as in section 34.

• The amendment made in Arbitration Act, 1996 clearly a step towards

reducing courts intervention in the arbitration proceedings. The
various amendments is aimed at making arbitration fast, efficient and
cost effective, so that commercial contracts disputes can be resolved
in a speedier manner.