ARBITRATION & CONCILATION ACT, 1996

Meaning of arbitration
The hearing & determining of a dispute or the settling of differences between parties by a
person or persons chosen or agreed by them: Rather than risk a long strike, the union and
management agreed to arbitration.

DEFINITION OF ARBITRATION ACT:

1. In this Part, 'arbitration agreement' means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may arise between them
in respect of a defined legal relationship, whether contractual or not.
2. An arbitration agreement may be in the form of an arbitration clause in a contract or
in the form of a separate agreement.
3. An arbitration agreement shall be in writing.
4. An arbitration agreement is in writing if it is contained in-
a. a document signed by the parties;
b. an exchange of letters, telex, telegrams or other means of telecommunication which
provide a record of the agreement; or
c. an exchange of statements of claim and defence in which the existence of the
agreement is alleged by one party and not denied by the other.
5. The reference in a contract to a document containing an arbitration clause constitutes
an arbitration agreement if the contract is in writing and the reference is such as to make
that arbitration clause part of the contract.

FEATURES

1. The Arbitration and Conciliation Act, 1996 ("the Act") contains provisions to deal
with domestic and international arbitration, and defines the law for conducting
conciliation proceedings.
2. There has been a manifold increase in the number of commercial disputes due to
globalisation, industrialisation and liberalisation. Arbitration has increasingly become
a preferred option to settle commercial disputes globally as well as in India.
3. Therefore, it was the need of the hour to reform the Act to achieve an effective and
efficient arbitration system for commercial dispute resolution.

Thus, with a view to make India a hub of institutional arbitration for both domestic as well as
international arbitration and to keep pace with international arbitration practices, certain
amendments are proposed in the Arbitration (Amendment) Bill, 2018. For this purpose, The
Arbitration and Conciliation (Amendment) Bill, 2018 was introduced.

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 Arbitration and Conciliation (Amendment) Act, 2015

Need for Amendment : The Indian Government has been taking considerable steps time
and again to make India also an international commercial arbitration hub similar to the likes
of Paris, Geneva or New York .Arbitration laws of India have been under foreign scrutiny
since a long time now. The interference of the judiciary in the international commercial
arbitration process has often been criticized and has led to dwindling of the confidence of
foreign investors posing as major threat to foreign business in India. This delay in judicial
process led to the first investment arbitration claim against the country in the case of White
Industries v. Republic of India8, wherein the decision was pronounced against the country.
The Arbitration of 1996 was passed with the main intention of expediting the process of
solving disputes between parties with minimum court interference. Though the Supreme
Court has delivered some landmark judgments which support apro-arbitration approach, 10
(ten) years down the line, the objective of the Act of1996 was far from achieved. The major
issue with arbitration in India is that, most of the arbitral awards
are challenged until they reach the highest court of the land thus ultimately resulting in
interference of the court, making the dispute settlement process more time consuming and
defeating the overall objective and purpose of the legislation. This was also one of the
reasons why foreign business leaders were wary of choosing India as a seat of arbitration.
Even Indian companies who entered into contracts with international investors and foreign
players preferred execution of awards and arbitration proceedings in a jurisdiction other than
India9. To make matters worse, renowned international arbitral institutions like, International
Chamber of Commerce (ICC) Paris, the London Court of International Arbitration and The
Singapore International Arbitration Centre, set up offices and started providing their services
locally. The amendment to the Act of 1996 was a move that was the need of the hour in light
of the Modi government ’agenda to improve ease of doing business of India.

Overview of Amendments
The key changes that have been brought about by the Arbitration and Conciliation (Amendment),
2015 are:

1. The definition of “court” in Section 2 has been amended to refer only to a High Court
in the case of International Commercial Arbitration.

2. The provisions for granting Interim relief (Section 9), Court assistance in taking evidence (Section
27) and Appeals (specifically, clause (a) of sub-section (1) and sub-section (3) of section 37) shall
from now on also be applicable to international commercial arbitrations.

3.The provision for setting aside an award on grounds of public policy has been modified to include
those awards that are i) in contravention with the fundamental policy of Indian law or ii) in conflict
with the notions of morality or justice, in addition to the grounds already specified in the Act.

4.The Act of 2015 has imposed strict time limits for the conclusion of arbitral process. The arbitral
tribunal has to make its award within twelve (12) months, which can be further extended to a period
of. 2
six (6) months. If the award is made with six (6) months, the arbitral tribunal will receive extra fees.
However if the award is delayed beyond the specified time because of the arbitral tribunal, the fees of
the arbitral tribunal will be reduced by up to five percent (5%) for each month of delay.

5. The parties to arbitration can also choose to conclude the proceeding in a fast track manner. The
award in such a
Proceeding would be granted within six (6) months.

6. Any challenge to an arbitral award must be disposed off within period of 1 (one) year.

7. Section 17 of the erstwhile Act of 1996 has been substituted fora new section 17 wherein the
arbitral tribunal has been given same powers to pass interim measures as the court an order of the
tribunal under this section shall been forced in accordance with the provisions of the Code of Civil
Procedure, 1908 in the same manner as it was an order of the court.

8. To Act of 2015 confers upon the Supreme Court or High Court powers to appoint an arbitrator on
application made by the parties. In an event such an application is made, the court should expediently
dispose of such application within sixty (60) days.

9. A complete cost regime has been introduced by section 31A of the Act of 2015 wherein the court or
arbitral tribunal shall have the power to determine costs on the principals of the losing party bearing
the costs or the court or arbitral tribunal may make a different order for reasons to be recorded in
writing.

10. Section 36 in the Act of 1996 has been substituted by a new Section 36 wherein if the time for
making an application to set aside an arbitral award has elapsed, then such an award shall be enforced
in accordance with the provisions of the Code of Civil Procedure, 1908 in the same manner as it was a
decree of the court. However, filing of an application to set aside an arbitral award shall not render the
award unenforceable unless the court grants an order to stay the operation of the said arbitral award.

By the enactment of the Arbitration and Conciliation (Amendment) Act, 2015 the government seeks
to expedite the arbitral process and help the government to achieve its goal of making India a seat for
international commercial arbitration like the other major business and financial districts of the world.
The Act of 2015 will also help in regaining the lost confidence of the foreign investors in the Indian
judicial and arbitral system.

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 2019, AMENDMENT OF ARBITRATRION ACT
The Arbitration & Conciliation (Amendment) Act, 2019 (“the 2019
Amendment”), which amends the Indian Arbitration & Conciliation Act, 1996
(“the Act”), came into force with effect from 9 August 2019. The Law Minister
of India was recently quoted as saying in one of the press releases (after
the Bill in support of the 2019 Amendment was introduced in the lower House
of Parliament), that the government intended to make India a hub of domestic
and international arbitration by bringing in changes in law for faster resolution
of commercial disputes.
Now that the 2019 Amendment is here, this post critically analyzes some of its
provisions to understand if it is indeed a step in the right direction for India to
become a hub for international arbitration. The analysis and comments in this
post are solely and exclusively from the standpoint of international arbitration.

Critical analysis of some key provisions of the 2019 Amendment

 The designation and grading of arbitral institutions

The 2019 Amendment introduces Section 11(3A) to the Act whereby the
Supreme Court of India and the High Courts shall have the power to designate
arbitral institutions, which have been graded by the Arbitration Council of India
(“ACI”) under Section 43-I (also introduced by the 2019 Amendment). The
underlying idea is that instead of the court stepping in to appoint arbitrator(s)
in cases where parties cannot reach an agreement, the courts will designate
graded arbitral institutions to perform that task (per Sections 11(4)–(6) of the
Act, as amended by the 2019 Amendment). The designation aspect has
already been discussed and criticized on this blog. However, it is the grading
aspect which I intend to deal with some detail.The 2019 Amendment
introduces Part 1A to the Act, which is titled as ‘Arbitration Council of India’
(Sections 43A to 43M) and which empowers the Central Government to
establish the ACI by an official gazette notification (Section 43B). The ACI
shall be composed of (i) a retired Supreme Court or High Court judge,
appointed by the Central Government in consultation with the Chief Justice of
India, as its Chairperson, (ii) an eminent arbitration practitioner nominated as
the Central Government Member, (iii) an eminent academician having
research and teaching experience in the field of arbitration, appointed by the
Central Government in consultation with the Chairperson, as the Chairperson-
Member, (iv) Secretary to the Central Government in the Department of Legal
Affairs, Ministry of Law and Justice and (v) Secretary to the Central
Government in the Department of Expenditure, Ministry of Finance – both
as ex officio members, (vi) one representative of a recognised body of
commerce and industry, chosen on rotational basis by the Central
Government, as a part-time member, and (vii) Chief Executive Officer-
Member-Secretary, ex officio (Section 43C(1)(a)–(f)). The ACI is inter
alia entrusted with grading of arbitral institutions on the basis of criteria
relating to infrastructure, quality and calibre of arbitrators, performance and
compliance of time limits for disposal of domestic or international commercial
arbitrations (Section 43I).
The main drawback of this scheme is that it limits party autonomy in
international arbitration through governmental and court interference. The ACI
is a government body which shall regulate the institutionalization of arbitration
in India and frame the policy for grading of arbitral institutions. The fact
remains that the court’s choice in designating an arbitral institution will be
limited by the options presented to it by the ACI. Consequently, the choice of a
foreign party appearing before the Supreme Court and seeking appointment of
an arbitrator will be limited to institutions which have ACI accreditation and to
such arbitrators who may be on the panel of such arbitral institutions. The
court will be equally handicapped in designating an ungraded institution –
which has a global reputation for its facilities and quality of services and which
wants to simply establish its local office in India, without going through the
administrative hurdles of being graded by the ACI.
The 2019 Amendment, albeit aimed at institutionalizing the arbitration scene in
India, leaves the discretion in the hands of courts and executive to decide who
gets to be a part of this reform. Another problem associated with this
governmental control over the institutionalization process is the (possible)
nepotism, red-tapism, lack of objectivity and lack of transparency in the
grading process. In my experience, a foreign party often prefers to stay away
from an arbitration regime with significant degree of court or governmental
interference. However, it is nonetheless a welcome move by the government
to acknowledge that institutional arbitration is the only way ahead to attract
foreign parties to include India as the seat in their arbitration agreements.

 Timely conduct of proceedings

As per the newly introduced Section 23(4), the statement of claim and defence
shall be completed within a period of six months from the date of appointment
of the arbitrator(s) and as per Proviso to the amended Section 29(1), the
award in the matter of international commercial arbitration may be made as
expeditiously as possible with an endeavour to deliver it within 12 months from
the date of completion of pleadings under Section 23(4).
Whilst it is a welcome step – certainly with the right intent – it may lead to
conflicts with the rules of an arbitral institution as it overlooks the procedural
aspects inherent to a complex international arbitration. In international
arbitration, the arbitrators routinely hold a case management hearing, and
after consultation with the parties, issue an order on the procedural timetable
for completion of pleadings, conduct of hearings etc. (e.g., see Rule 24 of the
2017 ICC Arbitration Rules). However, if Section 23(4) restricts a tribunal
from being in control of its proceedings, then it may be impossible to
effectively conduct complex multi-party arbitrations involving massive
documents, where it may be practically impossible to complete pleadings in
six months. Similarly, the autonomy of parties to decide on a more flexible
procedural schedule will be severely limited. Most importantly, the parties will
always be wary of the fate of an award where the time requirements of
Section 23(4) are not strictly abided.

 Confidentiality

As per the newly introduced Section 42A, the arbitrator, the arbitral institution
and the parties to the arbitration agreement shall maintain confidentiality of all
arbitral proceedings except award, where its disclosure is necessary for
implementation and enforcement of award.
The ICC recently released updates to its Note to Parties and Arbitral
Tribunals on the Conduct of Arbitration under the ICC Rules of
Arbitration, effective 1 January 2019 in which it stated that all awards made
as from 1 January 2019 may be published, no less than two years after their
notification, based on an opt-out procedure (paras. 40-46). Per the opt-out
procedure, any party may at any time object to publication of an award, or
request that the award be sanitized or redacted. In such a case, the award will
either not be published or be sanitized or redacted in accordance with the
parties’ agreement.

This shows at the outset that India’s practice in publishing the award is in line
with globally established arbitral institutions. However, by not incorporating an
opt-out scheme in Section 42A, the legislature missed the opportunity to bring
clarity to the fate of an award in terms of its publication. Who will decide that
the disclosure of an award is necessary for its implementation? Will it mean
full disclosure or will parties be allowed to agree on a redacted award? These
uncertainties, in my view, only add to the suspense.

 Qualification of arbitrators

The ACI is also entrusted with the function of reviewing the grading of
arbitrators (Section 43D(2)(c)). The qualifications, experience and norms for
accreditation of arbitrators shall be such as specified in the Eighth Schedule,
as introduced by the 2019 Amendment (Section 43J). The Eighth Schedule
stipulates nine categories of persons (such as an Indian advocate or cost
accountant or company secretary with certain level of experience or a
government officer in certain cases inter alia) and only those are qualified to
be an arbitrator.
Thus, a foreign scholar or foreign-registered lawyer or a retired foreign officer
is outrightly disqualified to be an arbitrator under the 2019 Amendment. For
obvious reasons, foreign parties will be discouraged to opt for Indian
institutional arbitration where the choice of candidates as their potential
arbitrators is limited by nationality, likelihood of lack of experience and
specialization – both academic and professional – in handling international
arbitrations.

Conclusion
The 2019 Amendment attempts to take this criticism head-on, however in my
view, it makes more misses than hits in the process. Although a step in the
right direction yet, India is far away from becoming a global arbitration hub.
 ARBITRATION AMENDMENT BILL , 2018

 The Arbitration and Conciliation (Amendment) Bill, 2018 was introduced in Lok
Sabha by the Minister for Law and Justice, Mr. PP Chaudhary, on July 18, 2018. It
seeks to amend the Arbitration and Conciliation Act, 1996. The Act contains
provisions to deal with domestic and international arbitration, and defines the law for
conducting conciliation proceedings. Key features of the Bill are:

 Arbitration Council of India: The Bill seeks to establish an independent body called
the Arbitration Council of India (ACI) for the promotion of arbitration, mediation,
conciliation and other alternative dispute redressal mechanisms. Its functions include:
(i) framing policies for grading arbitral institutions and accrediting arbitrators, (ii)
making policies for the establishment, operation and maintenance of uniform
professional standards for all alternate dispute redressal matters, and (iii) maintaining
a depository of arbitral awards (judgments) made in India and abroad.

 Composition of the ACI: The ACI will consist of a Chairperson who is either: (i) a
Judge of the Supreme Court; or (ii) a Judge of a High Court; or (iii) Chief Justice of a
High Court; or (iv) an eminent person with expert knowledge in conduct of
arbitration. Other members will include an eminent arbitration practitioner, an
academician with experience in arbitration, and government appointees.

 Appointment of arbitrators: Under the 1996 Act, parties were free to appoint
arbitrators. In case of disagreement on an appointment, the parties could request the
Supreme Court, or the concerned High Court, or any person or institution designated
by such Court, to appoint an arbitrator.

 Under the Bill, the Supreme Court and High Courts may now designate arbitral
institutions, which parties can approach for the appointment of arbitrators. For
international commercial arbitration, appointments will be made by the institution
designated by the Supreme Court. For domestic arbitration, appointments will be
made by the institution designated by the concerned High Court. In case there are no
arbitral institutions available, the Chief Justice of the concerned High Court may
maintain a panel of arbitrators to perform the functions of the arbitral institutions. An
application for appointment of an arbitrator is required to be disposed of within 30
days.
 Relaxation of time limits: Under the 1996 Act, arbitral tribunals are required to make
their award within a period of 12 months for all arbitration proceedings. The Bill
proposed to remove this time restriction for international commercial arbitrations.

 Completion of written submissions: Currently, there is no time limit to file written

submissions before an arbitral tribunal. The Bill requires that the written claim and
the defence to the claim in an arbitration proceeding, should be completed within six
months of the appointment of the arbitrators.

 Confidentiality of proceedings: The Bill provides that all details of arbitration

proceedings will be kept confidential except for the details of the arbitral award in
certain circumstances. Disclosure of the arbitral award will only be made where it is
 necessary for implementing or enforcing the award.

 Applicability of Arbitration and Conciliation Act, 2015: The Bill clarifies that the
2015 Act shall only apply to arbitral proceedings which started on or after October 23,
2015.

Why the new Arbitration and Conciliation

(amendment) Bill, 2019 is important :

 The Bill seeks to remove time restriction for international commercial arbitrations and
says tribunals must try to dispose of international arbitration matters within 12 months.
\
 Lok Sabha has passed the Arbitration and Conciliation (Amendment) Bill,
2019 which is aimed at making India an international arbitration hub.

 The bill, already passed by the Rajya Sabha, aims to establish an

independent body called Arbitration Council of India (ACI) for promotion
of arbitration, mediation, conciliation and other alternative dispute redressal
mechanisms.

 ACI’s functions would include framing policies for grading arbitral

institutions and accrediting arbitrators, making policies for establishment,
operation and maintenance of uniform professional standards for all
alternate dispute redressal matters, and maintaining a depository of arbitral
awards made in India and abroad.
 As per Section 43B of the Act, the Arbitration Council of India will have
perpetual succession and a common seal, with power, subject to the
provisions of the Act, to acquire, hold and dispose of property, both
movable and immovable, and to enter into contract. It can sue or be sued.
 The government, in consultation with the Chief Justice of India, will appoint
the chairperson of the ACI. The chairperson has to be a judge of the
Supreme Court or Chief Justice of a high court or a judge of a high court or
an eminent person, having special knowledge and experience in the conduct
or administration of arbitration.
 In the case of international commercial arbitration, appointments will be
made by the institution designated by the Supreme Court.
 In case of high court jurisdictions, where no graded arbitral institution is
available, Chief Justice of the concerned high court may maintain a panel of
arbitrators to discharge functions and duties. An application for appointment
of an arbitrator is required to be disposed of within 30 days.
 For domestic arbitration, appointments will be made by the institution
designated by the concerned high court.
 The Bill seeks to remove time restriction for international commercial
arbitrations and says tribunals must try to dispose of international arbitration
matters within 12 months.

Why is the arbitration bill important?

 1. Putting India on the world map in arbitration proceedings - It aims to

make India an international arbitration hub by providing facilities for
settlement of commercial disputes.
 “India is qualified to have a centre of international arbitration as it has
enough qualified lawyers, and has skill and training facilities," Law Minister
Ravi Shankar Prasad said replying to a debate on the bill. “India should not
accept imperialism in the field of arbitration. The best would be when Indian
arbitrators are sought globally. We want India to become a hub of
international arbitration."
 It aims to make the arbitration of excellent quality, bestowing responsibility
on the ACI to hold trainings, workshops, courses, frame policies, guidelines
and update norms to ensure satisfactory level of arbitrations, arbitral
institutions and the arbitrators.
 2. To reduce burden on courts- Presently, in case of any dispute with respect
to appointment of Arbitrators, parties have to approach the Supreme Court
or the High Court for appointment of Arbitrators or to resolve their dispute.
With the huge backlog of cases, the courts are already overburdened. An
effective ACI will share this burden of the court and even facilitate speedy
appointment of arbitrators. This would further aid quick resolution of
disputes outside the court.
 3. To provide exhaustive list to choose an arbitrator- The parties to an
arbitration agreement can choose their own arbitrator, this choice is
sacrosanct to arbitration process.
 The essence of choosing an arbitrator of choice is not circumscribed by the
nine broad qualification criteria as provided in the provisions of the bill. The
list is broadly phrased and includes the choice of arbitrators from advocates,
chartered accountant, cost accountant, company secretary, person with
technical knowledge and experience etc.
 4. To speed up arbitration process- The bill provides for statement of claim
and defence to be completed within six months from the date the arbitrator
receives the notice of appointment. This will fasten the entire process of
arbitration. Earlier, parties would take a lot of time to submit their pleas.
Now the time can be efficiently used for arbitration proceedings.

Major changes on sections :

 Revamp of appointment procedure for
Arbitrators under Section 11

 The most significant change brought by the Amendment Act is to completely

remove the scope of judicial intervention at the stage of appointment of
arbitrators by providing for appointment of arbitrators by arbitral institutions
designated by the Supreme Court and High Court in this regard. The
Amendment Act provides for setting up of an Arbitration Council of India that
 is entrusted with the grading of arbitral institutions and various other tasks
with the aim to promote arbitration in India. From among these graded arbitral
institutions, the Supreme Court or the High Court shall designate certain
arbitral institutions for the purpose of appointment of arbitrators under Section
11 of Arbitration and Conciliation Act, 1996 (the Act). An application for
appointment of arbitrators that was originally moved before the High Court or
Supreme Court is now required to be moved before such designated arbitral
institutions.

 While it may be presumptive at this stage to comment on the nature of power

conferred upon arbitral institutions, this amendment can be seen as an
attempt to bring the provision for appointment of arbitrators at par with those
existing in international jurisdictions such as Singapore and Hongkong.
Though the power under Section 11 of the Act was initially concluded by the
Supreme Court to be a judicial power, its entrustment to a body designated by
the Supreme Court / High Court dilutes its nature and tilts the weight towards
the administrative side. It remains open for the Arbitration Council of India to
include corresponding provision(s) akin to the now repealed Section 11(6-A)
for scrutiny of arbitration agreement by the designated arbitral institutions in
the regulations it frames for functioning of the designated institutions.

 While this amendment may expedite the process of arbitration as the

appointment of arbitrators is likely to be much faster now with limited scope of
judicial enquiry, its implications in case of frivolous and wrongful references to
arbitration might be to the contrary and might subject the opposite side to
needless arbitration especially in cases where there is no valid arbitration
agreement.

 The Amendment Act does not provide any guidelines for the composition or
the procedure to be adopted by arbitral institutions for the appointment of
arbitrators. The Arbitration Council of India set up under Part 1A is entrusted
with the task of framing regulations for the same. It is only when such
regulations are formulated that the exact nature of power conferred upon the
designated institutions and its practical implications would be clear. For now,
the limited takeaway remains the abrogation of power of the courts to appoint
arbitrators under Section 11 of the Act with the aim to reduce the scope of
judicial intervention in arbitration.
Limitation on challenge to arbitral award under
Section 34
 An interesting amendment to Section 34 of the Act seeks to further limit the
scope of judicial intervention at the post arbitral award stage. Prior to the 2019
Amendment, any party seeking to challenge the arbitral award under Section
34(2) was required to "furnish proof" with respect to the ground on which it
was seeking the setting aside of the arbitral award. The amended Section 34
now restricts the ability of the parties to furnish any fresh proof before the
court of challenge and restricts the scrutiny of the court to "the record of the
arbitral tribunal". That is to say, no fresh evidence can be led at the stage of a
Section 34 challenge application before a court.

 Practically, this necessitates that any challenge that is sought to be raised

before the court prospectively at the post award stage is raised first before the
arbitral tribunal or at least the document that is sought to be relied upon
before the court is subjected to the scrutiny of the arbitral tribunal during the
course of the arbitration proceedings. This move places a significant limitation
upon the courts to, at the post award stage, address only those challenges to
an arbitral award that were raised during the course of arbitration (for
instance, grounds like challenge to the validity of arbitration agreement, no
proper notice, etc.), thereby limiting the scope of judicial intervention.

 This move may be instrumental in expediting the dispute resolution process

as not only will there be limited scope of challenge but also, lesser judicial
time will be spent in scrutinizing the challenge and the veracity of the
evidence relied upon for the challenge.

 All interim measures of protection post

final award to be granted under Section 9

 A welcome change vide the Amendment Act is the removal of the clause "or at any
time after the making of the arbitral award but before it is enforced in accordance with
Section 36" in Section 17 of the Act which means that all interim measures post
award but prior to its enforcement will be dealt with by the concerned court under
Section 9 or Section 36 (read with the provisions of Civil Procedure Code).
 Prior to the 2019 Amendments, there was an overlap of authority between the court
and the arbitral tribunal under Section 9 and Section 17, respectively, as both could
be approached for interim measures of protection once the final award had been
made and was awaiting enforcement. The amendment clarifies the anomaly by
restricting the forum that can be approached for post award interim measure of
protection to courts under Section 9 of the Act. This position also fits well with the
existing arbitration structure envisaged under the Act wherein the arbitral tribunal
becomes functus officio upon pronouncement of the final arbitral award.
 Stricter timelines for completion of the arbitration process
 In an attempt to expedite the dispute resolution process, the Amendment Act
proposes a strict timeline of twelve months from the date of completion of pleadings
(and not from the date of reference to arbitration, as was prescribed in the original
Act) under Section 29A of the Act. It is interesting to note that this timeline is strict for
all arbitrations except international commercial arbitrations. The timeline remains
prescriptive for the latter. It may be assumed that this is an attempt to assuage
concerns regarding the Indian arbitration regime being too rigid and limiting scope for
flexibility, which arose after the Arbitration and Conciliation (Amendment) Act, 2015
(2015 Amendment Act) introduced stringent timelines for completion of arbitration
proceedings.
 Another welcome change to guard against notorious parties attempting to delay
arbitration proceedings is the insertion in Section 23 of the Act which requires parties
to complete pleadings within six months from the date when the arbitral tribunal was
appointed. This ensures that no party, on the pretext of supplementary pleadings,
continues to delay arbitral proceedings. While amendments to pleadings can still be
made at any stage of the arbitral proceedings, it remains to be seen if arbitrators will
exercise their discretion in refusing to allow amendments to pleadings post the expiry
of the period of six months.
 - Clarification of anomaly created by Section 26 of the 2015 Amendment Act
 One of the most significant amendments in the nature of clarification of an existing
legal position is the insertion of Section 87 which clarifies the confusion regarding the
application of the 2015 Amendment Act created by Section 26 therein. According to
Section 26 of the 2015 Amendment Act, the amendments brought by the 2015
Amendment Act were to apply to the ongoing arbitration proceedings upon
agreement to that effect of both the parties. With respect to the court proceedings
arising in connection to such arbitration proceedings, the Supreme Court, in the
judgment in Board of Control for Cricket in India v Kochi Cricket (P.) Ltd.[9] in the
context of Section 36 of the Act and in Ssangyong Engineering and Construction Co.
Ltd. v National Highways Authority of India[10] in the context of Section 34 of the Act,
clarified that the 2015 amendments were retrospective in the sense that they were
applicable to the court proceedings arising out of or in relation to arbitral proceedings
commenced before the introduction of the 2015 Amendment Act. This invited some
criticism as the 2015 amendments quite significantly overhauled the post arbitral
award regime and subjecting parties to the overhauled mechanism irrespective of
their agreement to this effect fell foul of one of the most important tenets of arbitration
- party autonomy.
 Section 87 seeks to address this concern. Section 87 is applicable retrospectively,
i.e. deemed to have taken effect from 23 October 2015 (the date on which 2015
Amendments came into effect) and clarifies that the 2015 amendments will be
applicable "only to arbitral proceedings commenced on or after the commencement
of the 2015 Amendment Act and the court proceedings arising out of or in relation to
such arbitral proceedings".
 - Setting up of Arbitration Council of India[11]
 This move is inspired by the aim to promote arbitration as a viable alternative dispute
resolution mechanism in India along with placing India as an arbitration friendly
 jurisdiction on the global map. The central body envisaged under the Amendment Act
consists of representatives from not only the legal field but also representatives from
the industrial and commercial sectors in an attempt to develop arbitration in a
business-friendly manner. The body corporate structure of the Arbitration Council of
India envisaged under the Amendment Act is entrusted with wide responsibilities.
Among others, these include framing policies for governing the grading of arbitral
institutions, developing mechanism for accreditation of creditors, providing norms for
conduct of arbitrations. As such, in furtherance of the objective of promoting
arbitration in the country, the Arbitration Council of India is aimed as a guiding and
standard setting body in the field of arbitration. This move is likely to ensure a
dedicated and experts-guided regulation of arbitration and reduce the scope of
judicial intervention in terms of setting standards / guidelines for conduct of arbitration
while adequately accounting for the interests and concerns of India Inc. with respect
to arbitration.
 - Schedule VIII- Qualifications to be an Arbitrator
 While the existing trend in arbitration in India has been to appoint a retired High Court
/ Supreme Court judge as an arbitrator, the Amendment Act, while laying down
qualifications to be an arbitrator, subtly expands the available choices for arbitrators
by allowing any advocate, chartered accountant, cost accountant, company secretary
or those engaged in technical / scientific field with a minimum of ten years'
experience to be an arbitrator provided they satisfy certain general norms that have
been made applicable to an arbitrator. These norms include neutrality, fairness,
integrity, impartiality, absence of conflict of interest and basic knowledge of law and
contracts. This is a reaffirmation of the fact that arbitration involves dispute resolution
not just in terms of strictures of law but also with due consideration to industry and
business practices. The latter is often overlooked in judicial determination of disputes
and can be adequately addressed by appointing field experts as arbitrators. The
introduction of qualifications vide Schedule VIII also offers guidance in terms of who
can be an arbitrator - an otherwise unregulated territory till now.

 While the Amendment Act does not clearly specify so, the nature of amendments
proposed suggests that it is prospective in nature[12] except where it is mentioned
otherwise (for instance, Section 13 of the Amendment Act clearly provides it to be
retrospective). The Amendment Act has also introduced some other amendments
which are welcomed and are in the interests of an efficient arbitration regime, such
as the need to maintain confidentiality[13], privileges to the arbitrator with respect to
act done in good faith and in accordance with the Act[14], reduction of standard of
scrutiny under Section 45 of the Act to make it pari materia with the enquiry under
Section 8[15], etc. While the amendments are good-intentioned and seem promising
in terms of promoting arbitration, the real implications are contingent upon their
implementation and the timely setting up of the Arbitration Council of India.
 CASE LAWS DUE TO WHICH THE ACT WAS
AMENDED IN 2018 and 2019 :

SECTION 7

Whether Arbitration Agreement can be binding on Non-Signatory to the

Agreement?

1. Cheran Properties Ltd. v. Kasturi and Sons Ltd. & Ors. Civil Appeal 10025/2017

While observing the principle enunciated in Chloro Controls that a non-signatory may
also be bound by an arbitration agreement in certain cases, the Court held that the
group of companies doctrine is essentially intended to facilitate the fulfillment of a
mutually held intent between the parties, where the circumstances indicate that the
intent was to bind both signatories and non signatories.

The effort is to find the true essence of the business arrangement and to unravel from
a layered structure of commercial arrangements, an intent to bind someone who is not
formally a signatory, but has assumed the obligation to be bound by the actions of a
signatory.

2. R.V. Solutions Pvt. Ltd. v. Ajay Kumar Dixit & Ors. 2019 SCC Online Del 6531
CS Comm 745/2017

The Delhi High Court held that a non-signatory or third party could be subjected to
Arbitration without its consent, only in exceptional cases. There needs to be either a
direct relationship to the signatory party of the Arbitration Agreement, or commonality
of the subject matter, or composite transactions in the agreement between the parties.

Incorrect reference regarding the applicability of the Indian Arbitration Act, 1940
would not render the entire Arbitration Agreement invalid

3. Purushottam S/o Tulsiram Badwaik v. Anil & Ors. Civil Appeal No.4664 of 2018

The Bench of Justice Arun Mishra and Justice UU Lalit of the Supreme
Court observed that even if an arbitration agreement entered into after the 1996 Act
had come into force were to make a reference to the applicable provisions of those
under Indian Arbitration Act or 1940 Act, such stipulation would be of no consequence
and the matter must be governed under the provisions of 1996 Act. Further, the Court
held that an incorrect reference or recital regarding the applicability of the 1940 Act
would not render the entire arbitration agreement invalid.
4. Mother Boon Foods Pvt Ltd v. Mindscape One Marketing Pvt Ltd O.M.P.
(COMM) 136/2017

The Court held that an arbitration agreement, as per the 1996 Act, has to be in writing.
Since the arbitration clause -which is a part of the contract - was in writing, the same
could not have been superseded by any oral demand or agreement.

SECTION 8

Whether Arbitration Clause can oust the jurisdiction of consumer forums?

5. M/S Emaar MGF Land Limited & Anr. v. Aftab Singh, 2018 SCC Online SC 2771

The Supreme Court upheld the NCDRC’s decision whereby it ruled that an Arbitration
Clause in a Buyer’s Agreement cannot circumscribe the jurisdiction of a Consumer
Fora, notwithstanding the amendments made to Section 8 of the Arbitration Act.

Referring Parties to Arbitration has serious civil consequences

6. Kerala State Electricity Board and Anr. v. Kurien E. Kathilal- Civil Appeal
Nos.3164-3165 of 2017

Referring the parties to arbitration has serious civil consequences procedurally and
substantively. When there was no arbitration agreement between the parties, without
a joint memo or a joint application of the parties, the High Court ought not to have
referred the parties to arbitration, the Supreme Court held in this case.

SECTION 9

Section 9 of the Arbitration Act cannot bypass Section 41 of the Specific Relief
Act

7. Parsoli Motor Works (P) Ltd. v. BMW India P Ltd. 2018 SCC Online Del 6556

The Delhi High Court held that injunctions that cannot be granted under Section 41 of
the Specific Relief Act, cannot be granted under Section 9 of Arbitration Act, 1996
either.

SECTION 11

Arbitral Clause to be strictly construed

8. Oriental Insurance Company Limited v. M/s Narbheram Power and Steel Pvt.
Ltd. Civil Appeal No. 2268 of 2018
The Supreme Court held that an arbitration clause is required to be strictly construed.
An12. BHEL v. Uttar Pradesh Rajya Vidhyut Utpadan Nigam Limited Arb. P
78/2019]

Relying on AAA Landmark Pvt. Ltd. vs. AKME Projects Ltd. & Ors, the Supreme Court
held that where the parties agree not to insist upon the exclusive jurisdiction clause in
an Agreement or raise such objection, and by their conduct, waive such
condition/submit themselves to another Court’s jurisdiction, it cannot be said that the
Court other than the one in which exclusive jurisdiction has been vested, would be
without jurisdiction.

 Detailed case law of Parsoli motors &

BMW India:
 They entered into an agreement of dealership to sell the BMW cars in
the state of Gujarat.The said dealership was renewed vide agreement dated
05th January 2009. Clause 1.1.1 thereof appointed the petitioner as a non-
exclusive dealer, of BMW cars, in the state of Gujarat. Clause 11.1 read
with the 7th Schedule to the agreement, stipulated that the agreement would
be deemed to have commenced on 1st January 2009, and would continue
for a period of one calendar year, at the end of which it would automatically
expire, unless terminated or cancelled earlier. The clause also empowered
the respondent to, "in its sole and unfettered discretion and without any
obligation or expectation to do so", renew the agreement for one calendar
year, by entering into a renewal agreement. Such renewal agreement,
however, it was stipulated, had to be entered into not less than one month
prior to the date of expiry of the agreement, i.e. not later than 1 st December,
2009. Clause 13.4 was an arbitration clause, providing for reference to
arbitration in the case of disputes arising between the appellant and
respondent.

 Though Clause 11.1 of the aforementioned agreement dated 5th January

2009 was clear, categorical and unequivocal, para 7 of the present petition
pleads thus: That the duration of the dealership agreement was for a period
of one year with the right to renew on the part of the Respondent. That the
duration in spite of being for one year only in writing, the understanding of
the parties, was that each year the renewal would take place (unless some
major default/breach which was not capable of been remedied had taken
place),because considering the amount of time, money, energy that is spent
in setting up the infrastructure, training the manpower, bringing in the
machineries/tools etc, specific to the sale and service of BMW cars, as per
the strict requirements of the Respondent, it is not commercially feasible
for any person to simply execute this dealership agreement only for the
duration of one year. Hence, in light of such understanding, the dealership
agreement was renewed from year to year from 2008 till 2017 onwards‖.
  It may be noted, here, that the above statement, by the petitioner, in Para 7
of the petition, that there was an ―understanding‖, between the petitioner
and the respondent, that the agreement would be renewed year to year, is
not supported by any clause in the agreement, or any other material which
is available on record in the present proceedings.

It appears that the dealership between the petitioner and the respondent was, in fact,
renewed year to year. Having said that, extension of the dealership, for the period 2015-
2016, was granted, to the appellant, by the respondent, not by a mere renewal of the earlier
existing agreement, but by a fresh agreement, made on 14th January 2015. For all intents
and purposes, the various clauses of the agreement dated 14th January 2015, were
substantially similar to the corresponding clauses in the aforementioned agreement dated 5
th January 2009. A few relevant clauses of the new Agreement may be reproduced, as
under:

1. BASIS OF THE AGREEMENT ―1.1 Distribution Rights for Contract Goods 1.1.1
Subject to the satisfaction of the condition precedent specified in Clause 1.1.2 below, BMW
hereby appoints the Dealer to be a non- exclusive dealer in Contract Goods at the
Authorized Premises in the Territory as hereinafter defined on the terms and conditions
hereinafter appearing, and the Dealer accepts such appointment and undertakes to perform
its duty and obligations appended to such appointment as specified in this Agreement or
otherwise.
It is distinctly agreed that BMW will always have the right to appoint, extend, terminate
any dealer or in any territory or appoint any additional dealer on additional terms and
conditions as it may impose in its commercial interest.‖
2. THE AUTHORISED PREMISES AND TERRITORY ―2.5 Activity outside the
Territory The Dealer will not outside the Territory with respect to the Contract Goods:
2.5.1 Maintain branches, workshops or delivery depots; or 2.5.2 Entrust a third party with
the distribution or servicing of Contract Goods; or 2.5.3 Engage in promotional activities
unless the Dealer uses an advertising medium such as local news media, which covers
mainly the Territory but also extends beyond it.

DURATION OF THE AGREEMENT

ANd TERMINATION Commencement and
Duration:
This Agreement shall cancel and supersede any and all previous agreements between the
Dealer and BMW or any of BMW's Connected Undertaking in any capacity whatsoever
and accordingly any Contract Goods on order from BMW or any of its Connected
Undertakings at the date of commencement of this Agreement shall be deemed to have
been ordered subject to the terms of this Agreement. The provisions of this Sub-Clause
shall not have the effect of releasing the Dealer from any liability to BMW arising from
any previous agreement or any prior breach.
This Agreement will commence or will be deemed to have commenced on the
Commencement Date shown in the Eighth Schedule and will continue thereafter (unless
terminated or cancelled earlier in accordance with the Agreement) for a period of 1 (ONE)
calendar year unless renewed in accordance with the provisions of this Clause 11.1. Upon
the expiry of such calendar year, this Agreement (and the appointment and rights of the
Dealer hereunder) shall (subject to the provisions of Clause 12) expire. BMW may (in its
sole and unfettered discretion and without any obligation or expectation to do so) renew
this Agreement for a period of 1 (ONE) calendar year by entering into a renewal agreement
(on terms and conditions acceptable to BMW) with the Dealer no later than 1 (ONE) month
prior to the expiry of this Agreement.

11.2 Termination for cause by BMW The following events shall entitle BMW to terminate
this Agreement forthwith.

11.2.1 the Dealer breaching any of its obligations in terms of this Agreement and failing to
rectify the situation within 14 (FOURTEEN) days of notice in writing to do so, it being
understood that a rectification shall only be possible if in BMW's sole and absolute opinion
that rectification is able to fully reinstate its business interests; or 11.2.1 the Dealer
defaulting or delaying in making any payment due, whether formally demanded or not or
suspends or threatens to suspend making any payments (whether of principal or interest)
with respect to all or any class of its debts; or 11.2.3 the Dealer having any financial facility,
which has been arranged by BMW or the Dealer for the payment of Contract Goods,
withdrawn for any reason whatsoever; or 11.2.4 BMW's brand products, services or
personnel is brought into disrepute or are likely to on account of any act or omission on the
part of the Dealer in BMW's opinion, which decision thereon will be final and binding; or
11.2.5 the Dealer fails to comply with BMW procedures or instructions in relation to
Authorised Premises and/or setting up and maintenance of 4S facility; or 11.2.6 the Dealer
being sequestrated, declared bankrupt, subject to suspension of payments proceedings,
insolvent or otherwise unable to pay or admits in writing its inability to pay its debts as
they fall due, placed under judicial management, effecting a compromise or arrangement
with creditors or general assignment in favour of creditors, having a special administrator
appointed over it, permitting an act of insolvency or bankruptcy or having an order of court
of competent jurisdiction is made (whether pursuant to the Companies Act, 1956 or
otherwise) or an effective resolution is passed or a petition is presented for the winding-up
or dissolution of the Dealer or if the Dealer shall apply or petition for a winding-up or
administration order in respect of itself (except for the purpose of reconstruction,
amalgamation, reorganization, merger or consolidation with the written consent of BMW
and the surviving or transferee entity assuming all the obligations of the Dealer); or 11.2.7
the Dealer being subject to or effecting any change in the control (board, shareholding,
financial or otherwise) of the Dealer or any Connected Undertaking without BMW's written
consent first being had and obtained; or 11.2.8 the Dealer changing or threatening to change
the nature or scope of its business, suspending or threatening to suspend a substantial part
of the present business operations which it now conducts directly or indirectly, or any
governmental authority expropriates or threatens to expropriate all or part of its assets; or
11.2.9 if any representation or warranty or statement which is made (or acknowledged to
have been made) by the Dealer in connection with the execution and delivery of or in this
Agreement shall be found to have been incorrect in any material and adverse respect, or if
repeated at any time with reference to the facts and circumstances subsisting at such time
would not be accurate in all material respects and if capable of remedy, such breach has not
been remedied within 14(FOURTEEN) days after written notice of such breach shall have
been given to the Dealer by BMW; or 11.2.10 if a receiver and/or manager over the Dealer's
property assets or undertaking or any part thereof is appointed; or 11.2.11 if a distress or
execution or other similar or equivalent process of a court of competent jurisdiction is
levied or issued against any of the properties of the Dealer and such distress or execution
or other process as the case may be is not discharged, withdrawn stayed within 14
(FOURTEEN) days from the date thereof; or 11.2.12 if any event or events shall occur or
a situation shall exist which could or might, in the reasonable opinion of BMW prejudice
the ability of the Dealer to perform its obligations under this Agreement; or 11.2.13 if any
material licence authorization approval or consent required by the Dealer to carry on its
business is revoked or withheld or is otherwise not granted ; or 11.2.14 it is or will become
unlawful for the Dealer to perform or comply with any one or more of their respective
obligations under this Agreement or this Agreement is or becomes, for any reason, invalid
or unreasonable; or 11.2.15 the Dealer shall fail to satisfy any judgment passed against the
Dealer by any court of competent jurisdiction and no stay of execution has been obtained
and no notice of appeal against such judgement has been taken to any appropriate appellate
court within the time prescribed by the relevant rules; or 11.2.16 anything analogous to any
of the events specified above occurs under the laws of any applicable jurisdiction;
In the event of the occurrence of any of the above events, then, notwithstanding anything
else contained herein, BMW shall be entitled to terminate and cancel this Agreement
immediately by the giving of written notice to the Dealer.
11.3 Termination for the cause by the Dealer The following events shall be events entitling
the Dealer to terminate this Agreement.
11.3.1 any governmental authority expropriates or threatens to expropriate all or part of
BMW'sassets;
11.3.2. it is or will become unlawful for BMW to perform or comply with any one or more
of their respective obligations under this Agreement or this Agreement is or becomes, for
any reason, invalid or unenforceable;
In the event of the occurrence of any of the above events, then, notwithstanding anything
else contained herein, the Dealer shall be entitled to terminate and cancel this Agreement
immediately by the giving of written notice to BMW.