The Government of India has recently notified “The Arbitration and Conciliation (Amendment) Ordinance, 2015”. The notification was issued on October 23, 2015 and came into effect from the same date.
The Ordinance has brought in various amendments to expedite hearing as well as disposal of Arbitration proceedings in a time bound manner apart from other amendments. It takes into consideration the recent judgments pronounced by the Hon’ble Supreme Court of India, such as Applicability of Section 9 for Interim measures in case of International Arbitral Proceedings. The focus of this article is mainly on amendmentswhich are aimed at the time bound disposal of Arbitral Proceedings in India.
In the Arbitration & Conciliation Act, 1996, certain provisions were prone to misuse by litigants, enabling them to delay the proceedings and also give one party an advantage over the other. For example, Section 9 of the Arbitration and Conciliation Act of 1996 provided for interim measures by court. Thus, a litigant could approach the court, either before or during the Arbitral proceedings, or at any time after the making of Arbitral Award, but before it was enforced, for an interim measure such as preservation of property, interim custody or sale of goods, detention, preservation, or inspection of property, interim injunction or appointment of receiver. There was a similar provision under the Arbitration Act of 1940 under Section 17, however, this earlier Act did not elaborate on the kind of orders a court could pass.
There were instances where a litigant would approach the court for an interim measure and once the court granted an order in its favour, the party enjoying the interim protection, would delay the disposal of Section 9 petition before the court itself, and would also delay commencement of arbitration proceedings. The provisions of Section 9 of Arbitration and Conciliation Act, 1996 did not provide for time bound invocation and was, in fact, silent on this aspect, which lead to abuse by litigants.
Under the Amendment Ordinance of 2015, two new sub sections have been inserted by way of Section 9 (2) and Section 9 (3).
Section 9(2) provides, that in cases where an interim order is passed under Section 9 (1) [Section 9 has been renumbered as Section 9(1)], before the commencement of the Arbitral proceedings, they must commence within 90 days from the date of such order or within such further period as the court may determine.
Thus, sub-Section (2) provides for time bound invocation and commencement of Arbitration proceedings. Accordingly, once an interim order of any nature is passed by the court under Section 9(1) of the Act, the Arbitral proceedings must commence in a time bound manner and cannot be delayed at any cost, unless the period is extended by the court.
Further, there is an important amendment under Section 11 of the Arbitration & Conciliation Act, 1996, by insertion of sub-section 11 (13). In the earlier Act of 1996 there was no specified time limitwith relation to the appointment of an Arbitrator. Hence, a litigant petitioning the court for appointment of an Arbitrator could not be certainof the time that would be taken to dispose off his petition. Now, by virtue of the amendment of 2015, the time period is specified as sixty days. However, it appears that even the Amendment of 2015 in relation of Section 11 (13) is more directory in nature, and not mandatory, hence, there could still be some delays beyond 60 days.
The earlier Act of 1996 was silent on the time bound disposal of the Arbitration proceedings as well as the period within which an Award could be made. By way of Amendment under Section 29, a new section as been inserted as Section 29A and further sub-sections have been added. Sub-Section 29A(1) provides for a time bound disposal and publication of award. An Arbitrator must publish the award within 12 months from the date the Arbitral Tribunal enters reference. Date of Reference shall be deemed to be the date on which the Arbitrator or all the Arbitrators have received the notice, in writing, of their appointment.
Further, sub-section (2) of Section 29A provides for an incentive to the Arbitral Tribunal if it publishes the award within six months ofits date of reference. In such cases, it shall be entitled to receive an additional amount, such as the parties may agree, which shall be over and above the Fourth Schedule of the Model Fee structure, or, their entitled amount.
Incase the award is not made within 12 months as provided under Section 29A (1) then the Arbitral Tribunal, under Section 29A(3), may extend the period by another six months upon consent of the Parties.
Incase the Arbitral Tribunal fails to publish the award within 12 months as provided under Section 29A(1), or extended period of further six months under Section 29A(3), then the mandate of the Arbitrator shall terminate. However, the courts may extend the period further on an appropriate application by the Parties, and, in such cases, the mandate of the Tribunal shall not terminate. The proviso of Section 29A(4) is that while extending the period, if the court finds that the proceedings have been delayed for reasons attributable to the Arbitral Tribunal, then it may order reduction of fees of the Arbitrators to the extent of 5% for each month of such delay. However, if the delay is attributable to the litigants, the court may extend the period on showing sufficient cause and on such terms as it may deem fit. The court may also impose exemplary costs as a condition for extension.
Where the Arbitral Proceedings have been delayed due to reasons attributable to the Arbitrator, the Court shall also havethe power to substitute one or all Arbitrators, and the proceedings under Arbitration shall continue from the stage already reached prior to the substitution.
For the purpose of disposal of Application under Section 29A (5) for extension of period of Arbitration, it is mandated that the Courts should endeavour to dispose off the application as expeditiously, and if possible, within sixty days. The time period provided herein is more of directory in nature and not mandatory or binding on the court.
Section 29B has been inserted for adoption of Fast Track procedure, wherein litigants may, either before the commencement of the Arbitration proceedings, or after, agree to adopt Fast Track procedure. They may agree to refer the matter to the Sole Arbitrator for a fast track procedure, wherein the dispute shall be decided on the basis of written pleadings, documents, and submissions filed by the parties without any oral hearing. The Arbitral Tribunal may call for further information or clarification from the parties in addition to the pleadings. The Award must be made within six months from the date when the Arbitral Tribunal enters reference. In case the award is not made within the period of six months, the provisions of Section 29A (3) to (9) shall apply with respect to extension of time periodetc.
The amendment brought in by the Government of India is a step in the right direction. The very purpose of Arbitration was being defeated due to delays and expenses. Questions were being raised as to why one should submit to Arbitration, which could, because of delays, become a long drawn and expensive affair. With the above highlighted amendments, there is an intent to curtail delays and expedite proceedings so that the final award is passed within the period provided under the Act.
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