Today's Editorial

06 March 2018

Making India a hub of arbitration

Source: By Manoj K Singh: The Financial Express

The Arbitration and Conciliation Act, 1996, was enacted in order to minimise the supervisory role of the courts in settlement of disputes. The Act also permits an arbitral tribunal to use mediation, conciliation or other procedures during arbitral proceedings in order to encourage the settlement of disputes. The recent amendment to the Act by way of the Arbitration and Conciliation (Amendment) Act, 2015, led to some significant changes, such as time-bound arbitration, power of the courts in appointing the arbitrator, widening the powers of the arbitral tribunal, settling the judicial vagarities under Section 34 of the Act, etc. Further, with the amendment of 2015 to the Arbitration and Conciliation Act, 1996, two new sections—namely 29A and 29B — has been added, which provide for time limit for arbitral award and fast-track procedure, respectively.

Section 29A provides a time limit of 12 months plus six months (total of 18 months) within which the arbitral award should be made, failing which the mandate of the arbitrator should be terminated. Additionally, Section 29B provides that the parties to the arbitration agreement may opt for the fast-track procedure wherein the award has to be made within six months of the reference to the arbitrator(s).

Now, if the dispute between the parties is referred to the normal course of litigation, it usually takes an average of 6.5 years in order to reach an effective solution, mainly due to the delays caused by the stays granted by the High Courts and the Supreme Court, according to a study by the law ministry. In comparison, under the Arbitration and Conciliation Act, 1996, the interference by the courts is limited to what is provided for in the Act.

It is notable that even after the termination of arbitral proceedings, the Act provides for limited scope of court intervention. The appeal against the arbitral award is restricted to grounds mentioned under Section 34 of the Act (application for setting aside arbitral award), wherein the recourse to a court against an award is limited to the extent provided for under the section itself. Even if such an appeal is preferred to the court against an arbitral award, the same shall have to be disposed of expeditiously within a period of one year from the issuance of notice to the other party.

In addition, the application made under Section 34 is to be made within three months from the date of receiving the arbitral award, although the delay of more than the above-mentioned period may be accepted by the courts but not more than a further period of 30 days. The NITI Aayog has also laid down the procedure where in case of claims where the PSU/department has challenged the arbitral award already announced, it shall have to pay the 75% of the award to the contractor or the concessionaire against a bank guarantee.

Further, such payments shall be made into a designated escrow account with the stipulation that the amount so released will be used first for the payment of the lenders dues and second for the completion of the project and then for the completion of other projects of the same PSU/department, as mutually agreed upon.The government of India is also committed for speedy resolution of commercial disputes, and to make India an international hub of arbitration and a centre of robust ADR (alternative dispute resolution) mechanism catering to international and domestic arbitration, at par with the global standards available.

In order to achieve these objectives, the government has constituted a 10-member High Level Committee under the chairmanship of Justice BN Srikrishna, a retired judge of the Supreme Court. The committee has recently submitted a report on making India a hub of arbitration. Towards that, the roadmap of the suggested reforms after an in depth examination of the issues by the High Level Committee can result in a paradigm shift from the current perception of delays in resolution of commercial disputes in India to it being viewed as an investor-friendly destination.

The suggested reforms will not only lessen the burden of the judiciary, but provide a fillip to the development agenda of the government, aid the financial strength of the country and serve the goal of welfare of the citizens. It is noticeable that the ADR mechanism has evolved over the years and has resulted in yielding better and time-effective outcomes as compared to the conventional option of filing the dispute before the courts. ADR has also become a favourable tool for the resolution of disputes without further burdening the already overburdened judicial system of our country, and has emerged as an aid to improve the financial health of the country.



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