ARBITRATION AND CONCILIATION (AMENDMENT) ACT, 2021

The Central Government has notified on March 11, 2021 the Arbitration and Conciliation (Amendment) Act, 2021 (“Amendment Act”) to replace the Arbitration and Conciliation (Amendment) Ordinance, 2020, which was promulgated by the President on November 04, 2020 to further amend the Arbitration and Conciliation Act, 1996 (“ the Act”). The Amendment Act shall be deemed to have come into force with effect from November 04, 2020.

1. to grant unconditional stay of enforcement of arbitral awards, where the underlying arbitration agreement, contracts or arbitral award is induced by fraud or corruption;
2. to omit Eighth Schedule of the Act which laid down the qualifications, experience and norms for accreditation of arbitrators; and
3. to specify by regulations the qualifications, experience and norms for accreditation of arbitrators and the said amendment is consequential in nature.

1. Position before the Amendment
   
   1. Section 36 of the Act provides for the enforcement of arbitral awards. Section 36 originally entails that;
      1. Where the time for making an application to set aside the arbitral award under Section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court.
      2. Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose.
      3. Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:

      Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.

   2. Section 36 (prior to the 2015 amendment), provided that

      “where the time for making an application to set aside the arbitral award under award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the Court.”

      The erstwhile Section 36 resulted in the enigmatic effect of an “automatic stay” on the enforceability of awards. To cure the same Arbitration and Conciliation (Amendment) Act, 2015 was brought into force whereby Section 36 was substituted (as provided above) and now only on a separate application under Section 36 (2) can the court grant an order of stay.

2. Post Amendment
   

   The Amendment Act provides for the inclusion of a second proviso after Section 36 (3). The new proviso says that:

   “Provided further that where the Court is satisfied that a prima facie case is made out that,
   1. the arbitration agreement or contract which is the basis of the award; or
   2. the making of the award,

   was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under Section 34 to the award.

   Explanation- For the removal of doubts, it is hereby clarified that the above proviso shall apply to all court cases arising out of or in relation to arbitral proceedings, irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015.”

   The amendment provides for an additional ground under which one can seek an order of stay. After the amendment, the court can stay the award when it is prima facie satisfied that the award, arbitration agreement or contract is induced by fraud or corruption. The amendment has been proposed to address the issue of corrupt practices in securing contracts or arbitral awards and to ensure that all the stakeholder parties get an opportunity to seek unconditional stay of enforcement of arbitral awards, where the underlying arbitration agreement or contract or making of the arbitral award is induced by fraud or corruption.

3. Amendment of Section 43J

   Section 43J inserted by Arbitration and Conciliation (Amendment) Act, 2019 provides for the norms for accreditation.

   Prior to the amendment Section 43J provided that “the qualifications, experience and norms for accreditation of arbitrators shall be such as specified in the Eighth Schedule:

   Provided that the Central Government may, after consultation with the Council, by notification in the Official Gazette, amend the Eighth Schedule and thereupon, the Eighth Schedule shall be deemed to have been amended accordingly.”

   The Amendment Act provides to substitute erstwhile Section 43J with the following words- “the qualifications, experience and norms for accreditation of arbitrators hall be such as may be specified by the regulations”, thereby omitting the Eighth Schedule to the Act.

   The Eighth Schedule specifies the qualifications, experience, and norms for accreditation of arbitrators. The Amendment Act by removing the reference to the Eight schedule now provides for the accreditation of arbitrators to be laid down in “regulations”, which are yet to be formulated.