Author Name:   mrinalini01

The arbitration bridge for smooth drive i.e. to maintain healthy relationship between parties has gone rough with time. A strong need is being felt to modernize the bridge. The Ministry of Law has circulated a consultation paper for proposed amendment in Arbitration and Conciliation Act, 1996 to comments on proposed amendment....

The significant increase in the role of international trade in the economic development of nations over the last few decades has been accompanied by a considerable increase in the number of commercial disputes as well. In India too, rapid globalization of the economy and the resulting increase in competition has led to an increase in commercial disputes. At the same time, however, the rate of industrial growth, modernization, and improvement of socio-economic circumstances has, in many instances, outpaced the rate of growth of dispute resolution mechanisms. In many parts of India, rapid development has meant increased caseloads for already overburdened courts, further leading to notoriously slow adjudication of commercial disputes. As a result, Alternative Dispute Resolution mechanisms including arbitration have become more crucial for businesses operating in India as well as those doing businesses with Indian firms.

Halsbury defines arbitration as “ the reference of dispute or difference between not less than two parties, for determination, after hearing both sides in a judicial manner, by a person or persons other than a Court if competent jurisdiction.” In ancient times, people often voluntarily submitted their disputes to a group of wise men of a community called the panchayat for a binding resolution. The court system appointed by the king only changed after the arrival of British who overhauled the traditional Indian Legal system including codification of arbitration laws with the passage of first Code of Civil Procedure 1859. Modern arbitration law in India was created by the Bengal Regulations in 1772, during the British rule. The Bengal Regulations provided for reference by a court to arbitration, with the consent of the parties, in lawsuits for accounts, partnership deeds, and breach of contract, amongst others.

Until 1996, the law governing arbitration in India consisted mainly of three statutes:

(i) the 1937 Arbitration (Protocol and Convention) Act,

(ii) the 1940 Indian Arbitration Act, and

(iii) the 1961 Foreign Awards (Recognition and Enforcement) Act.

The 1940 Act was the general law governing arbitration in India along the lines of the English Arbitration Act of 1934, and both the 1937 and the 1961 Acts were designed to enforce foreign arbitral awards (the 1961 Act implemented the New York Convention of 1958). The government enacted the Arbitration and Conciliation Act, 1996 (the 1996 Act) in an effort to modernize the outdated 1940 Act. The 1996 Act is a comprehensive piece of legislation modeled on the lines of the UNCITRAL Model Law. This Act repealed all the three previous statutes (the 1937 Act, the 1961 Act and the 1940 Act). Its primary purpose was to encourage arbitration as a cost-effective and quick mechanism for the settlement of commercial disputes. The 1996 Act covers both domestic arbitration and international commercial arbitration.

The 1996 Act has admirably achieved two goals. First, it has unified the legal regime surrounding arbitration for both domestic and international arbitration conducted in India. Second, it has improved arbitral efficiency by reducing the need for judicial intervention, enforcing awards as judicial decrees, and granting greater autonomy to arbitral tribunal decisions (though a lot still needs to be done to fully accomplish this goal). However amongst other goals one of the goals of the 1996 Act was to achieve cheap and quick resolution of disputes, but current ground realities indicate that these goals are yet to be achieved. The ground realities can be ascertained from the study and analysis of the various aspects in conducting arbitration. The 1996 Act was brought on the statute book as the earlier law, the 1940 Act, did not live up to the aspirations of the people of India in general, and the business community in particular. Even though the 1996 Act was enacted to plug the loopholes of 1940 Act, the arbitral system that evolved under it led to its failure. The main purpose of the Act was to provide a speedy and efficacious dispute resolution mechanism to the existing judicial system, marred with inordinate delays and backlog of cases. But an analysis of the arbitration system, as practiced under the 1996 Act, reveals that it failed to achieve its desired objectives.

As per Asian International Arbitral Journal 2008, percentage of domestic arbitral awards challenged before the SC and HC in India on various grounds between1996 to 2007 are:

Grounds              SC                                 HC                             SC& HC (foreign award)

Jurisdiction          68.75                             43.53                            29.41

Public Policy       12.5                                26.72                           17.64

Limitation            6.25                                13.62 -

Non Appreciation of facts and evidence 12.5 2.47 -

The former minister of law Veerappa Moily has in his speech said that there are 52,592 cases pending in Supreme Court and 71,680 cases and 49,417 cases in Allahabad and Kolkata High Court respectively emphasizing on the need of ADR mechanism.

The bridge of arbitration though was constructed way back by the legislature for parties at dispute to cross it amicably by spending less fuel (money) and avoid longer rout ( of court) but it has failed to achieve its purpose. Even today a large number of parties take a longer route of court. A need for bridge’s (Arbitration and Conciliation Act, 1996) renovation has arisen. An attempt was made to amend the Arbitration and Conciliation Act, 1996 in 2003 but it failed as the Standing Committee of Law Ministry felt that the Bill "gave room for excessive intervention by the courts in arbitration proceedings." A Consultation Paper was published by the Ministry of Law & Justice, Government of India on 8th April 2010 carrying the proposed amendment in ADR Act and comments were invited on the proposed amendments. The purpose behind the proposed amendments to the said Act is to minimize court intervention in arbitral proceedings and to institutionalize the arbitration process in India.

The problem with existing law and proposed changes by law commission:
The Law Commission has in its consultation paper proposed the following changes:
1. Section 2(2) of the Arbitration and conciliation Act, 1996 gave rise to two highly controversial Supreme Court decisions. In the case of Bhatia International v. Bulk Trading the SC held that in absence of the word ‘only’ in Section 2(2), part I of the Act would apply to arbitration held outside India, so long as the law of India governs the contract and in view of the observations made by the Supreme Court in Shreejee Traco(I) Pvt. Ltd. Vs. Paper Line International Inc, no provisions of Part I would apply to cases where the place of arbitration is not in India. So, to remove this conflict the proposed amendment brings in word ‘only’ along with a proviso which extends the application of Section 9 and 27 in International Commercial Application where the place of arbitration is not in India if an award made in such place is enforceable and recognized under Part II of this Act.

2. Similarly, problem with respect to power of Chief Justice under Section 11(6) of Arbitration and Conciliation Act, 1996 arose. The SC in one of the case has held that the exercise of the power by Chief Justice under Section 11(6) is purely administrative in nature and in another case the same court had said that the power exercised by the Chief Justice of the High Courts or the Chief Justice of India under Section 11(6) of the Act is judicial power and not an administrative power and that such power, in its entirety, could be delegated only to another Judge of that Court. Thus giving right to the court to decide preliminary aspects as regards its own jurisdiction to entertain the request, existence of a valid arbitral agreement, the existence or otherwise of a live claim, the existence of the conditions for the exercise of the power and on the qualifications of the Arbitrator. Hence, substitution of word ‘Chief Justice’ with ‘High Court’ with further amendment in other subsections of Section 11 has been proposed.

3. An arbitrator under Section 12 of the Arbitration and Conciliation Act, 1996 needs to disclose only those circumstances which according to him can raise doubt on his impartiality but there is no obligation on him to disclose all relevant facts. Moreover, the circumstances are mostly in his personal knowledge. In order to bind the arbitrator to disclose all relevant facts Subsection 1 of Section 12 is proposed to be substituted. This amendment will bind the arbitrator to disclose any relationship between him and parties and empower Central Government to make any rules in this behalf.

4. A plane reading of Section 28 of the Arbitration and Conciliation Act, 1996 tells that arbitral award cannot be interfered with by the court even if it is contrary to the substantive provisions of law. The Supreme Court in Oil & Natural Gas Corpn. Ltd. v. Saw Pipes Ltd, held that if the award is contrary to the substantive provisions of law or the provisions of the Act or against the terms of the contract, it would be patently illegal, which could be interfered under Section 34. To remove this conflict between statute and judgment and to bestow justice an amendment in Subsection 3 of Section 28 has been proposed.

5. Section 31of the Arbitration and Conciliation Act, 1996 provides for interest at the rate of 18% p.a. which is too harsh on the parties. So, the interest rate has been proposed to be amended.

6. The Supreme Court while interpreting ‘public policy in India’ in the case of Oil & Natural Gas Corpn. Ltd. v. Saw Pipes Ltd stated that the concept of public policy connotes some matter which concerns public good and the public interest. This decision had been the subject matter of public debate and criticism. To nullify the effect of this decision of the Supreme Court, it has been proposed that the existing Explanation in section 34 be renumbered as Explanation 1 and after that Explanation as so renumbered another Explanation shall be inserted.

7. As per Section 13(2) the party which challenges the appointment of the arbitrator may file an application for setting aside such an arbitral award. But until the arbitral award is made the party challenging the appointment of arbitrator cannot make any application to the Court. However in section 34 there is no specific mention of such a ground for setting aside an arbitral award. Similarly as provided in Section 16(2) & Section 16(3), the arbitral tribunal may rule on its own jurisdiction and an appeal lies under Section 37 against the order of the arbitral tribunal accepting the plea under sub‐section (2) and (3) of Section 16. However, no appeal is provided against an order rejecting such plea. The petitioner has only right to challenge the award under Section 34 after it is made but Section 34 does not enable the parties to question the decision of the arbitral tribunal made under Section 13 (2) rejecting a plea of bias or to question the decision of the said tribunal made under Section 16 (2) or (3) rejecting a plea of want of jurisdiction on the part of the arbitral tribunal. Therefore, it has been proposed to add sub-clause (iii) in clause (b) of Sub-section (2) of Section 34.

8. The Law Commission in its Report had observed that parties are filing applications to set aside the award even though there is no substance whatsoever in such applications and to put a stop to this practice, proposed the amendment of section 36 of Arbitration and Conciliation Act, 1996. To avoid the present procedure at two levels, by a separate law it has been proposed to constitute Commercial Division in the High Court.

9. After the judgment of Supreme Court in the case of S.B.P. Company Vs. Patel Engineering Ltd the role of arbitration institution has become almost nil. Hence to promote institutionalization of ADR Section 34A has been proposed to be added in Arbitration and Conciliation Act, 1996.

10. Further it has been suggested to expressly have in writing arbitration agreement for contract with a consideration of specified value (Rs. 5 crore or more). This arbitration agreement shall also contain that all dispute s(except (here specify the excepted disputes, if any) arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of approved arbitral institution by one or more of the arbitrators appointed in accordance with the said Rules. Where the parties fail to mention the Approved Arbitral Institution, High court will authorize to an Approved Arbitral Institution to appoint arbitrator within 30 days of the reference made to it by either party for the appointment of Arbitral Tribunal. Here “Commercial Contract” shall mean every contract involving exchange of goods or services for money or money’s worth and includes carriage of goods by road, rail, air, waterways, banking, insurance, transactions in stock exchanges and similar exchanges, forward markets, supply of energy, communication of information, postal, telegraphic, fax and Internet services, and the like. For making these changes provisions in the Arbitration & Conciliation Act, 1996, many provisions of the Act including Section 7 (which deals with arbitration agreement), Section 8, Section 2(1)(b) have to be amended.

Additional (Suggested) Changes:
In order to make the Arbitration and Conciliation Act, 1996 more effective in addition the proposed changes in proposed amendment in Arbitration and Conciliation Act following changes can also be brought.

1. The terms seat and place have been in controversy since long. In case of Videocon Industries Ltd. v. UOI and Anr. the Supreme Court has discussed the meaning of seat and place. The Act can contain India to be the seat of arbitration when the contract of arbitration involving Indian party does not specify the seat of arbitration or stipulates a floating arbitration.

2. Section 2(1)(e) of the Arbitration and Conciliation Act, 1996 uses term place. This term (place) shall be replaced by seat as the term place means a local where proceedings may be carried on account of convenience whereas substantive legislative significance is attached with term seat and is decisive as to the law governing arbitration.

3. As the act is applicable on both domestic and international commercial arbitration it goes ambiguous at places. Further clarity with respect to its application in domestic and international commercial arbitration is required.

4. For speedy disposal of cases the Act may provide for time limit within which the case should be decided. The time limit for domestic and international commercial arbitration shall be different.

5. An unresolved issue that has arisen with regard to interim measures is whether Indian courts have jurisdiction to grant interim measures of protection where the seat of arbitration is foreign. This might occur where two parties (Indian national v. non-Indian) hold arbitration outside India and the Indian party needs an interim measure of protection of an Indian court to secure their rights (i.e. to secure assets, to appoint receivership, etc). Since interim measures are of great practical importance to the parties involved, the determination of which decision-making body to approach is of critical importance. Unfortunately, the Supreme Court has not yet settled the issue, and the answer has, like a burning ember, been tossed from court to court. The act can specifically lay down under Section 9 of the act as to jurisdiction of the court to grant or not to grant interim measure in cases where parties or one of the party is Indian and seat of arbitration is foreign.

6. Under section 9 of the Arbitration and Conciliation Act, 1996 after an interim order is granted by the court if the party fails to initiate the arbitral proceedings, the interim order of protection passed by the court becomes almost a final order. Since the Original Petition is already disposed, the only remedy available for the party who has suffered the interim order of protection is to file a writ petition under Article 227 of the Constitution of India before the High Court. Further once the interim order of protection is passed by the Court under S.9, even if the arbitral tribunal finds subsequently, that such order may have to be varied or modified, the arbitral tribunal finds that its power under Section 17 may not be effective to override or alter the orders given by the court under Section 9 of the Act. This leads to failure of justice. So Section 9 and 17 (with respect to changes in Section 9) of Act can also be amended.

7. At present after making an award the arbitral tribunal gives the original stamped award to the claimant and in some cases the arbitral tribunal gives signed copies to the parties and retains the stamped award. A proper procedure can be to file the original stamped award in the Arbitration Division of the High Court or the Principal Civil Court of Original jurisdiction, as the case may be, which would deal with challenge under Section 34 or execution under Section 36 and to give signed copies to the parties. So, Section 32 also can be amended.

8. To ensure implied arbitration in high consideration value contracts it would be preferable to incorporate a clause in Arbitration and Conciliation Act, 1996 requiring compulsory arbitration agreement clause in contract of or above a certain amount.

9. The Commercial Division of High Courts Act, 2009 has undergone change. This change would require some more amendments in Arbitration & Conciliation Act, 1996.

10. A new chapter can be included after part I of the schedule under the title of single member fast track tribunal or Fast Track Arbitration. After the Third Schedule there should be an insertion of Fourth Schedule which will contain the constitution of Fast Track Tribunal, procedure to be applied and representation of Counsel, etc.

11. One of the issues which can arise with respect to institutional arbitration is “competency of the arbitrator”. A rule with respect to qualification of arbitrators should be developed. The legislature can further add a provision directing government to lay down the necessary qualifications for arbitrators.

Impact of changes in the act:
It is only when disputes come before the court no matter how well the drafting is we realize legislative short comings. However on close analysis following impact can be seen after the application of changes proposed by the law ministry in the Arbitration and Conciliation Act, 1996

i) Decision of institution will not act as precedent. Law develops with the help of judicial interpretation. The sapling of arbitration though has been planted in India it still has to spread its roots. The scope of development of arbitration law will decrease substantially due to reduction in number of arbitration cases in the court.

ii) Over the time more rules and laws will be framed with respect to institutional arbitration. Each of such rules and laws being compulsory it will be incorporated into traditional court process.

iii) The awards of institutions can not be appealed and might not be published. It cannot fully contain the urge of the homo ratio juris to rely on previous decisions and to seek coherence.

iv) Issues with respect to degree of confidentiality will arise.

v) In the institutional arbitration there can be dictatorship of experts.

vi) As the act does not talk about the qualification of arbitrators, there can be cases challenging the competency of arbitrator to arbitrate, thus rendering the entire purpose behind institutionalizing arbitration futile.

vii) Soon with respect to systematically review the governing policies, rules and procedures with an eye towards continual revision will be made by the courts when any dispute challenging the process of arbitration arises before it or by the Central Government. But it will result into ossification of flexible arbitration process.

viii) Most Arbitration is ad hoc arbitrations. There are few institutions which can provide arbitration facilities under their Rules. Often, retired judges are appointed as arbitrators who, by virtue of long tenures behind the Bench, have got accustomed to tedious rules pertaining to procedure and evidence. As a result, arbitrations become a battle of pleadings and procedures, with each party trying to stall if it works to their favor. And, there may be a temptation for arbitrators to prolong the arbitration to earn higher "sitting fees".

ix) Whispers also abound of arbitrators being vulnerable to `being procured' and those with deep pockets being able to purchase justice.
x) Many arbitrators are not familiar with the practice of arbitration or how to effectively conduct the arbitral process.
xi) Without institutionalization, parties to a foreign arbitration simply will not have the option to seek interim measures which may result in a denial of justice.
xii) Court assistance may be essential to justice because in many cases jurisdiction of the foreign arbitral tribunal is limited and it inherently lacks enforcement capabilities.

Conclusion
The act was laid down way back in 1996. An amendment is a constructive attempt to update it with the changing times. The consultation paper calling for views of people will help people in participating actively and expressing their views. No matter how equipped a person is, it is not possible to foresee every situation. All what is needed now is that the law ministry looks into the view of people and makes further changes in the proposed amendment before coming up with an amended Arbitration and Conciliation Act, 1996.

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# Nearly 30 million cases pending in courts

# K Ravi Kumar, ‘Alternative Dispute Resolution in Construction Industry’, International Council of Consultants (ICC) papers, www.iccindia.org. at p 2. K Ravi Kumar is assistant executive engineer, Salarjung Museum, Hyderabad.

# The legal Regimes Affecting Internation Commercial Arbitration in India and Singapore: A Comparative Study by Llavin C Hirani pg.13

# K Ravi Kumar, ‘Alternative Dispute Resolution in Construction Industry’, International Council of Consultants (ICC) papers, www.iccindia.org. at p 2. K Ravi Kumar is assistant executive engineer, Salarjung Museum, Hyderabad.

# K Ravi Kumar, ‘Alternative Dispute Resolution in Construction Industry’, International Council of Consultants (ICC) papers, www.iccindia.org. at p 2. K Ravi Kumar is assistant executive engineer, Salarjung Museum, Hyderabad.

# The New York Convention of 1958, i.e. the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, is one of the most widely used conventions for recognition and enforcement of foreign awards. It sets forth the procedures to be used by all signatories to the Convention. This Convention was first in the series of major steps taken by the United Nation since its inception, to aid the development of international commercial arbitration. The Convention became effective on June 7, 1959.

# The 1996 Act, Section 85.
# Justice Ashok Bhan in his inaugural speech delivered at the conference on ‘Dispute Prevention and Dispute Resolution’ held at Ludhiana, India, October 8, 2005.
# See Krishan, Ranbir. An Overview of the Arbitration and Conciliation Act 1996. 21
# J. Int’l Arb. 263, 265 (No. 3, 2004). (stating the objects and reasons behind the adoption of arbitration Act.
# Professor Anurag Agarwal, ‘Resolving Business Disputes in India by Arbitration: Problems due to the Definition of ‘Court’, Indian Institute of Management, Ahmedabad, 2008 at p10.
# Development and Practice of Dispute Resolution in India by Krishna Sharma, October 2009
# Asian International Arbitration Journal, 2008, vol.4, number 1, page 73-74,81.
# Indian Express ‘The Government Contemplating Amendment to Arbitration’, Bangalore 26 August 2009
# Indian Express ‘The Government Contemplating Amendment to Arbitration’, Bangalore 26 August 2009
# S.A ((2002) 1 Arb LR 675)

# (2003) 9 SCC 79
# Section 2(2)-This part shall apply only where the place of arbitration is in India.
# Provided that provisions of Sections 9 and 27 shall also apply to international commercial arbitration where the place of arbitration is not in India if an award made in such place is enforceable and recognized under Part II of this Act.

# Konkan Railway Corp. Ltd. Vs Rani Construction (P) Ltd. (2002) 2 SCC 388
# SBP Co. Vs. Patel Engineering Ltd (2005) 8 SCC 618
# Proposed Amendment to the Arbitration and Conciliation Act, A Consultation Paper pg. 15

# Section 11- (a) In sub-Section (4) in clause (b) for the words, ‘by the Chief Justice or any person or institution designated by him” the words “by the High Court or any person or institution designated by it” shall be substituted.

(b) In sub-Section (5) for the words, “by the Chief Justice or any person or institution designated by him” the words “by the High Court or any person or institution designated by it” shall be substituted.
(c) In sub-Section (6) for the words, “by the Chief Justice or any person or institution designated by him” the words “by the High Court or any person or institution designated by it” shall be substituted.
(d) For sub-section (7), following sub-section shall be substituted namely:-

# A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the High Court or the person or institution designated by it shall be final and no appeal including a letter patent appeal shall lie against such decision.”

(e) In sub-Section (8) for the words, “by the Chief Justice or any person or institution designated by him” the words “by the High Court or any person or institution designated by it” shall be substituted.
(f) In sub-Section (9) for the words, “the Chief Justice of India or any person or institution designated by him” the words “the Supreme Court or any person or institution designated by it” shall be substituted.
(g) In sub-section (10) for the words, “The Chief Justice”, the words, “High Court” shall be substituted.

(h) In sub-Section (11), for the words, “the Chief Justice of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be”, the words, “different High Courts or their designates, the High Court or its designate to which the request has been first made under the relevant subsection shall alone be” shall be substituted.

(i) For sub-section (12) following sub-section shall be substituted, namely:-

# “12(a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to “High Court” in those sub-sections shall be construed as a
# reference to the “Supreme Court”.
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to “High Court” in those sub-sections shall be construed as a reference to the “High Court” within whose local limits the principal civil court referred in clause (e) of sub-Section (1) of Section 2 is situate and, where the High Court itself is the Court referred to in that clause, to that High Court.”

(j) After sub-section (12), following sub-sections shall be inserted, namely:- “(13) Notwithstanding anything contained in foregoing provisions in this Sections, where an application under this Section is made to the Supreme Court or High Court as the case may be for appointment of arbitrator in respect of ‘Commercial Dispute of specified value’, the Supreme Court or the High Court or their designate, as the case may be shall authorize any arbitration institution to make appointment for the arbitrator.

Explanation:- For the purpose of this sub-section, expression “Commercial Dispute” and “specified value” shall have same meaning assigned to them in the Commercial Division of High Court Act, 2009.”

(14) An application made under this Section for appointment of arbitrator shall be disposed of by the Supreme Court or the High Court or their designate, as the case may be as expeditiously as possible and endeavor shall be made to dispose of the matter within sixty days from the date of service of notice on the opposite party.

# Proposed Amendment to the Arbitration and Conciliation Act, A Consultation Paper pg. 15

Section 12- (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances:

(i) such as the existence of any past or present relationship, either direct or indirect, with any of the parties or any of their counsel, whether financial, business, professional, social or other kind or in relation to the subject matter in dispute, which are likely to give rise to justifiable doubts as to his independence or impartiality; and

(ii) such other circumstances as may be provided in the Rules made by the Central Government in this behalf.

# (2003) 5 SCC 705
# Section 28(3)- In all cases, the arbitral tribunal shall take into account the terms of the contract and trade usage applicable to the transaction.
# Section 31- A sum directed to be paid by arbitral award shall carry interest at the rate of one percent higher than the current rate of interest from the date of award to the date of payment.
# Explanation- The expression “Current rate of interest” shall have same meaning as assigned to it under clause (b) of Section 2 of the Interest Act, 1978.
# 2003) 5 SCC 705
# Section 36 Explanation II- For the purposes of this section “an award is in conflict with the public policy of India” only in the following circumstances, namely:-
# When the award is contrary to the-
(i) fundamental policy of India; or
(ii) interests of India; or
(iii) justice or morality.
# 34(2)(b)(iii) the application contains a plea questioning the decision of the arbitral tribunal rejecting –
(a) a challenge made by the applicant under sub-section (2) of section 13; or
(b) a plea made under sub-section (2) or sub-section (3) of section 16

# Proposed Amendment to the Arbitration and Conciliation Act,pg.31

# Section 36. Enforcement of award.-

(1) Where the time for making an application to set aside the arbitral award under sub-section (1) of section 34 has expired, then, subject to the provisions of subsections (2) to (4), 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.

(2) Where an application is filed in the Court under sub-section (1) of section 34 to set aside an arbitral award, the filing of such an application shall not by itself operate as a stay of the award unless, upon a separate application made for that purpose, the Court grants stay of the operation of the award in accordance with the provisions of sub-section (3).

(3) Upon filing of the separate application under sub-section (2) for stay of the operation of the award, the Court may, subject to such conditions as it may deem fit to impose, grant stay of the operation of the arbitral award for reasons in brief to be recorded in writing:

# Provided that the Court shall, while considering the grant of stay, keep in mind the grounds for setting aside the award.

(4) The power to impose conditions referred to in sub-section (3) includes the power to grant interim measures not only against the parties to the award or in respect of the property which is the subject-matter of the award but also to issue ad interim measures against third parties or in respect of property which is not the subject matter of the award, in so far as it is necessary to protect the interests of the party in whose favour the award is passed.

(5) The ad interim measures granted under sub-section (4) may be confirmed, modified, or vacated, as the case may be, by the Court subject to such conditions, if any, as it may, after hearing the affected parties, deem fit.

# By a separate law it is proposed to constitute Commercial Division in the High Court which will also entertain applications under Section 34 and Section 36 and appeals under section 37 of the Arbitration and Conciliation Act, 1996 where the arbitration relates to “Commercial Disputes” of specified value. For this purpose definition of ‘Court’ in Section 2 of the Arbitration Act is also being amended.

# (2005) 8 SCC 618
# Section 34A. Application for setting aside arbitral award on additional ground of patent and serious illegality.-

(1) Recourse to a Court against an arbitral award made in an arbitration other than an international commercial arbitration, can also be made by a party under subsection (1) of section 34 on the additional ground that there is a patent and serious illegality, which has caused or is likely to cause substantial injustice to the applicant. patent and serious illegality, which has caused or is patent and serious illegality which has caused or is likely to cause substantial injustice to the applicant.

(2) Where the ground referred to in sub-section (1) is invoked in an application filed under sub-section (1) of section 34, while considering such ground, the Court must be satisfied that the illegality identified by the applicant is patent and serious and has caused or is likely to cause substantial injustice to the applicant.

# Proposed Amendment in Arbitration and Conciliation Act, 1996 pg. 36,37.

# Decided on 11th May 2011
# CONSULTATION ON AMENDING THE INDIAN ARBITRATION ACT by Ashok Sancheti in Indian Council of Arbitration, Vol. XLVII

# Indian Legal Space “Amendments required in Indian Arbitration and Conciliation Act” by Lavanya Chandan

# Finding Harmony with UNICETRAL Model: Contemporary issues in International Commercial Arbitration in India after the arbitration and Conciliation Act 1996 by Sandeep S. Sood

# Comments and suggestions on the consultation paper by Indian Institute on Arbitration& Mediation. “Sec.9(iii) Where a party makes an application under sub-section (i) or (ii) for the grant of interim measures before the commencement of arbitration, the Court shall direct the party in whose favour the interim measure is granted, to take effective steps for the appointment of the arbitral tribunal in accordance with the procedure specified in section 11, within a period of thirty days from the date of such direction.

(iv) The Court may direct that if the steps referred to in sub-section (iii) are not taken within the specified period, the interim measure granted under section 9, shall stand vacated on the expiry of the said period:

# Provided that the Court may, on sufficient cause being shown for the delay in taking such steps, extend the said period.

(v) Where an interim measure granted stands vacated under sub-section (iv),the Court may pass such further direction as to restitution as it may deem fit against the party in whose favour the interim measure was granted under this section.

(vi) While passing orders of interim protection under sub-sections (i) or (ii), the court may specify that the interim measure of protection granted, may be modified, altered or vacated, if the Arbitral Tribunal, after going through the evidence of the case, finds that such modification, alteration or cancellation is required for the ends of justice.”

# Section 17 (3) Where a party makes an application under sub-section (1), for which there is already an order under Sec. 9 by the court, then if the arbitral tribunal feels, after going through the evidence that such order should be modified, varied or vacated for the interest of justice and for the balance of convenience, shall pass appropriate orders under sub-section (1), modifying, varying or canceling such orders, with such conditions as it may deem fit in the circumstances of the case.

P# rovided that such modification, variation or cancellation shall not result in nullifying the execution of the award that may be passed against a party.”

# Comments and suggestions on the consultation paper by Indian Institute on Arbitration& Mediation “Sec32(4) On passing of the final award, the original stamped award and a photocopy of the arbitral award duly signed on each page by the members of the arbitral tribunal, together with the original arbitral records shall be filed in the Principal Civil Court of Original jurisdiction in the District or if the arbitration is relating to commercial disputes of specified value, in the Arbitration Division of the High Court, by the arbitral tribunal or the institution under Sec.6, if so designated, within thirty days of the making of the award along with the list of papers comprising the arbitral records.

(5). Where the arbitral tribunal or institution, as the case may be, fails to file the original stamped award, photocopy of the arbitral award and the arbitral records under sub-section (4), any of the parties may give notice to the arbitral tribunal or institution to do so within a period of thirty days from the date of receipt of such notice, failing which the party may request the Principal Civil Court of Original jurisdiction in the District or if the arbitration is relating to commercial disputes of specified value, in the Arbitration Division of the High Court to direct the arbitral tribunal or the institution to file the award and records.”

# Comments and suggestions on the consultation paper by Indian Institute on Arbitration& Mediation “Section 2(1)(e): “Court”, in relation to,
(i) sections other than sections specified in sub-clause (ii) means:
(a) the principal Civil Court of original jurisdiction in a district, or

(b) any Court of coordinate jurisdiction to which the Court referred to in sub clause (a) transfers a matter brought before it, and includes the High Court in exercise of its original jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes; and

(ii) sections 34, 36 and 37 where the arbitration is relating to commercial disputes of specified value, means the Commercial Division of the High Court constituted under sub-section (1) of section 3 of the Commercial Division of High Court Act, 13(2) Amendment in Section 37:

# In section 37, in sub-section (1), in clause (b), the following proviso shall be inserted, namely:- “Provided that where the arbitration relates to a commercial dispute of specified value, the appeal shall lie to the Supreme Court in accordance with the provisions contained in section 13 of the Commercial Division of High Courts Act, 2009.” section 13 of the Commercial Division of High Courts Act, 2009.”
# 176th Report of Law Comission of India on Arbitration and Conciliation (Amendment)Bill
# Promod Nair, “Quo vadis Arbitration in India?” http://www.thehindubusinessline.com/2006/10/19/stories/2006101900101100.htm
# “Is Judicial Intervention in arbitration justified?” http://indiacorplaw.blogspot.com/2009/04/nlsir-symposium-is-Judicial.html
# “Is Judicial Intervention in arbitration justified?” http://indiacorplaw.blogspot.com/2009/04/nlsir-symposium-is-Judicial.html
# “Is Judicial Intervention in arbitration justified?” http://indiacorplaw.blogspot.com/2009/04/nlsir-symposium-is-Judicial.html
# http://digitalcommons.law.uga.edu/cgi/viewcontent.cgi?article=1000&context=stu_llm

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