1. ARBITRATION AND CONCILIATION ACT,1996
AN ANALYSIS OF THE AMENDMENTS AND ITS EFFECT ON THE CORPORATION

2. ARBITRATION : MEANING
Arbitration is an alternate dispute resolution mechanism between parties to a contract.
The law which is prevailing for last 20 years relating to arbitration in India is governed under the provisions of Arbitration and Conciliation Act 1996.

3. WHY ARBITRATION AND NOT LITIGATION?
Litigation, as we know, takes considerable period of time to adjudicate the dispute between parties. However, where rights of parties to a contract are only limited to the contract itself, there is always a need for an alternative mechanism for resolution of disputes between parties to a contract without going for litigation.
This is where the alternate dispute resolution mechanism through arbitration comes in. So, the very object of choosing arbitration as a preferable dispute resolution mechanism than litigation is to avoid the long drawn process of litigation in court.

4. The concept of arbitration has 2 broad advantages over litigation:
Cost.
ii. Time.

5. ARBITRATION : EXPERIENCE IN LAST TWO DECADES
The 1996 Act has now been in force for almost two decades, and in this period of time, although arbitration has fast emerged as a frequently chosen alternative to litigation, it has come to be afflicted with various problems including the following:
high costs
ii. delays

6. So far as the first point of cost is concerned, our experience in the last two decades says that arbitration has become a much more expensive process than litigation – WHY?
1. Fees of arbitrators: Good arbitrators fix their fees at their own discretion, which happens to be very high. Court nominated arbitrators can only charge the fees fixed by the court beforehand. However, since the process was not time bound and the fees are payable per sitting-wise, at the end of the process, the total fees paid to an arbitrator is found to be a considerable one.

7. 2. Fees of Counsels: Counsels appearing in arbitration usually charge much higher fees than their appearance fees in court.
3. Administrative expenses: There are lot of administrative expenses involved in arbitration payable by the parties to disputes, which are not there in litigation.
4. Venue: Venue hire charges have also been seen to be expensive

8. THE OTHER MAIN CONCERN IS OF DELAY:
1. The main reason behind in delay in the arbitration process, as we have experienced, is the interference of the court. The 1996 Act has several provisions permitting the court to interfere into the process of arbitration.

9. For instance:
(a) Appointment of arbitrators by Chief Justice of High Court of particular State;
(b) Reference of disputes to arbitration by court;
(c) Interim measures by the court;
(d) Appeal to Appellate Court against grant or refusal of interim measures by court;
(e) Appeal to Appellate Court against grant or refusal of interim measures by arbitrator;

10. (f) Appeal to Appellate Court against decision of the arbitrator not to act for want of jurisdiction;
(g) Appeal to Appellate Court against a decision on challenge to an award;
(h) Challenge to an award;
(i) Enforcement of an award.
2. Since the process was not time bound, it many cases the process keeps on moving for years.

11. NEED FOR CHANGE:
As we have been discussing the main object of the concept of arbitration happens to be frustrated due to some flaws in the 1996 Act, the legislature made an effort to overcome the flaws existing in the 1996 Act by introducing certain amendments to the Act of 1996 in October 2015.

12. The 246th Report of Law Commission of India made suggestions for certain amendments in the Act of
Based on such suggestions, the Amendment Bill of was introduced in the Parliament.
By way of an Ordinance, the Amendment came into force on 23rd October 2015 and ultimately the Ordinance became the Act upon President’s assent on 31st December However, the date of effect of the Amendment was given on 23rd October 2015.

13. THE AMENDMENT TRIED TO TAKE CARE OF THE FOLLOWING BROAD ISSUES:
Cost effectiveness.
Time bound process.
Expeditious disposal.
Benefit to foreign investors.

14. KEY HIGHLIGHTS OF THE AMENDMENT ACT:
Definite meaning to the term “Court”
Choice of arbitrator
Curtailment of power of Court to interfere
Right of a 3rd party arising out of an arbitration agreement
Change in the powers of arbitrator
Fixation of fee structure
Fast track procedure
Time bound procedure
Expeditious Disposal
Eligibility of Arbitrator
Other Changes
Applicability

15. DEFINITE MEANING TO THE TERM “COURT” [Section 2(1)(e)]
The first and foremost amendment introduced by the Amendment Act is with respect to definition of expression 'Court'. 
A clear distinction has been made between an international commercial arbitration and domestic arbitration with regard to the definition of 'Court'.

16. DEFINITE MEANING TO THE TERM “COURT” [Section 2(1)(e)]
Post 2015 Amendment
Pre 2015 Amendment
The definition has created a distinction between international commercial arbitrations and the other types of arbitration.
For international commercial arbitrations, the court of reference would be the High Courts in all cases.
The definition did not create any distinction between the different types of arbitrations (domestic or international).

17. In case of international commercial arbitration the term 'Competent jurisdiction’.
As per the amendment, no lower court will have jurisdiction in international commercial arbitration disputes other than the High Court.
Due to the amendment, now parties to the international commercial arbitration has been defined to mean only High Court of arbitration can approach the High Court at the first instance.

18. CHOICE OF ARBITRATOR

19. CHOICE OF ARBITRATOR: [SECTION 12: IMPARTIALITY OF THE ARBITRATOR]
Section 12 has been amended to introduce the Fifth and Seventh Schedule which provides for the conditions under which the impartiality of the Arbitrator can be challenged.
A person having any such relationships as mentioned in the Seventh Schedule of the Amended Act is not eligible for appointment as an arbitrator.
In view of this, Government units and Public Sector Enterprises cannot appoint their own employees as Arbitrators.

20. THE FIFTH SCHEDULE : GROUNDS THAT WOULD GIVE RISE TO DOUBT TO INDEPENDENCE AND IMPARTIALITY OF ARBITRATOR:
Existence of the Arbitrator’s relationship with the parties or the counsel.
Existence of a relationship of the Arbitrator to the dispute.
The Arbitrator has a direct or indirect interest in the dispute.
The Arbitrator has previously served for one of the parties or some other involvement in the case.
There exists a relationship between an Arbitrator and another Arbitrator or counsel.
There exists a relationship between the Arbitrator and a party and others involved in the arbitration.
Other circumstances which could raise a doubt about the impartiality of the Arbitrator.

21. CURTAILMENT OF POWER OF COURT TO INTERERE

22. CURTAILMENT OF POWER OF COURT TO INTERERE PRIMA FACIE EXISTENCE OF ARBITRATION AGREEMENT: [SECTION 8]
As per the Amendment Act, the Courts will now have to refer the parties to arbitration, provided there exists a valid arbitration agreement.
The sub-section(1) has been amended envisaging that notwithstanding any judgment, decree or order of the Supreme Court or any court, the judicial authority shall refer the parties to the arbitration unless it finds that prima facie no valid arbitration agreement exists. 

23. CURTAILMENT OF POWER OF COURT TO INTERERE SECTION 8- REFERENCE TO ARBITRATION
Prior to the Amendment :
Section 8 (1) mandated any judicial authority to refer the parties to arbitration in respect of an action brought before it, which is the subject of an arbitration agreement.
The 1996 Act only provided for reference of disputes to arbitration by the parties to the arbitration agreement and no relief was available to the person claiming through or under them.
Further, the parties could seek arbitration only if they were in possession of the original arbitration agreement or a certified copy thereof.

24. A provision had been added to Subsection (2)
CURTAILMENT OF POWER OF COURT TO INTERERE PRIMA FACIE EXISTENCE OF ARBITRATION AGREEMENT: [SECTION 8]
Sub-section (1) had been substituted, whereby the power of the judicial authority is limited to inquiring the existences of a prima facie arbitration agreement.
A provision had been added to Subsection (2)
A party applying for reference of matter to arbitration can make application to the Court for a direction of production of the original or certified copy of the arbitration agreement, in case the parties applying for reference of the disputes to arbitration is not in the possession of the arbitration agreement and the opposite party has the same.

25. CURTAILMENT OF POWER OF COURT TO INTERERE PRIMA FACIE EXISTENCE OF ARBITRATION AGREEMENT: [SECTION 8]
After the 2015 Amendment, any judicial authority will have to direct the parties to arbitration if a valid arbitration agreement exists.
A decision of the Supreme Court or a higher judicial authority will not have any effect on the power of the Court to refer the matter to arbitration.

26. CHANGE IN POWERS OF ARBITRATOR

27. CHANGE IN POWERS OF ARBITRATOR
Amendment to Section 17: The Arbitral Tribunal has all the powers to grant interim measures which the court is empowered to have under Section 9 of the Act. Any order issued by the Tribunal will be deemed to be an order of the court for all purposes and shall be enforceable under the Code of Civil Procedures, 1908.

28. FIXATION OF FEE STRUCTURE

29. FIXATION OF FEE STRUCTURE :
Insertion of Sub-section 14:
Section 11(14) of the Amendment Act empowers the High Court to frame rules for the determination of fees of the Arbitral Tribunal in accordance with the rates specified in the Fourth Schedule of the Act.

30. FIXATION OF FEE STRUCTURE :
Under the Arbitration and Conciliation (Amendment) Act, 2015:
Under the Arbitration and Conciliation Act, 1996:
The 1996 Act was silent on the issue of the fees of the Arbitrator.
This led to a situation where Arbitrators used to fix the fees of the proceedings as per their discretion, which was unusually high.
Section 11(14) was inserted which provides for measures in order to fix the fees of the Arbitral Tribunals.
A model schedule of fees was introduced as the Fourth Schedule.

31. FAST TRACK PROCEDURE

32. FAST TRACK PROCEDURE FOR ARBITRATION : [SECTION 29 B]
The concept of fast track arbitration was introduced in the 2015 Amendment in order to expedite the arbitration process.
The 2015 Amendment permits parties to choose to conduct arbitration proceedings in a fast track manner. 
The award would be granted within six months.

33. TIME BOUND PROCEDURE

34. TIME BOUND PROCEDURE:
Under Section 29A, the Tribunal shall ensure speedy completion of arbitration proceedings within a period of twelve months from the date of reference.
However, the parties may extend such period up to six months.
Thereafter, it can only be extended by the Court, on sufficient cause.
The Court while extending the period may also order reduction of fees of arbitrator(s) not exceeding five percent for each month of delay, if the court finds that the proceedings have been delayed for reasons attributable to the arbitral tribunal.
If the award is made within a period of six months, arbitrator may get additional fees if the parties may agree.

35. TIME BOUND PROCEDURE: SECTION 29 A: EFFECT OF THE AMENDMENT :
ARBITRATION PROCEEDINGS TO BE FASTER
Section 29A has been added to the Act with a view to making the to proceedings time bound.
Section 29A states that arbitration proceedings shall be concluded within 1 year and any further extension will be granted by the Court after evaluation. The Court may also impose penalties.

36. SECTION 14: TERMINATION AND SUBSTITUTION OF ARBITRATOR :
Section 14 of the Act mandates termination of an arbitrator as well as the substitution of another arbitrator in case of failure or impossibility to act.
Prior to the Amendment only the termination provision existed.
The Amended section mandates substitution of another arbitrator in place of the terminated arbitrator.

37. TIME BOUND PROCEDURE: SECTION 9- INTERIM RELIEF:
The amended section 9 of the 2015 Act
The 2015 Act enables parties to seek interim relief from a court, prior to the commencement of arbitration, but stipulates that arbitration should generally be commenced within 90 days of obtaining such interim measures.
Under Section 9, when the Courts grant an interim relief, the arbitration proceedings should start within 90 days.

38. TIME BOUND PROCEDURE:
SECTION 24
The 2015 Act requires the arbitral tribunal to hold the oral hearings for the presentation of evidence or oral arguments on day-to-day basis.
Further, it mandates the tribunal not to grant any adjournments unless sufficient causes shown.
It further empowers the tribunal to impose exemplary costs on the party seeking adjournment without any sufficient cause.

39. EXPEDITIOUS DISPOSAL

40. EXPEDITIOUS DISPOSAL: APPOINTMENT OF ARBITRATORS [SECTION 11]
Under Section 11, the High Court or Supreme Court can appoint an arbitrator now. Prior to the amendment, only the Chief Justice could appoint.
As per the new Act, the expression “Chief Justice of India” and “Chief Justice of High Court” have been replaced with “Supreme Court” or “High Court” respectively. 

41. EXPEDITIOUS DISPOSAL: APPLICATION FOR SETTING ASIDE ARBITRAL AWARD: [SECTION 34 READ WITH SECTION 36:]
The Amendment Act narrows down the scope for judicial intervention & clarifies that an award will be treated to be in conflict with the public policy of India, only under following circumstances:
a. when the award is induced or affected by fraud or corruption,
b. is in contravention with the fundamental policy of Indian law,
c. is in conflict with the most basic notions of morality or justice. The scope of the inquiry by the judiciary into the question of violation of ‘public policy’ has been reduced.

42. EXPEDITIOUS DISPOSAL: SECTION 36: STAY ON ENFORCEMENT OF ARBITRAL AWARD:
As per Section 36 of the Amended Act: mere filing of an application for challenging the award would not automatically stay execution of the award.
Award can only be stayed where the Court passed any specific order on an application filed by the party.

43. ELIGIBILITY OF AN ARBITRATOR

44. ELIGIBILITY OF AN ARBITRATOR :
Subsection (5) was inserted to Section 12 by way of Amendment:
As per this Subsection, any person whose relationship with the parties or counsel or subject matter of dispute falls under categories specified in 7th Schedule is not eligible to be appointed as Arbitrator.
However, subsequent to disputes having arisen, parties may by expressly entering into a written agreement waive the applicability of this provision.
CATEGORIES : AS PER THE SEVENTH SCHEDULE :
Arbitrator’s relationship with the parties or Counsel;
Relationship of the arbitrator to the dispute;
Arbitrator’s direct or indirect interest in the dispute;

45. ELIGIBILITY OF AN ARBITRATOR :
Section 12(5) was inserted by the Amendment Act and is stated as follows:
“Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator: 
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this subsection by an express agreement in writing.”

46. The amended section 12(5) has now mandated that if the arbitrator and any of the parties to the dispute are in a relationship which falls under the categories mentioned in the Seventh Schedule of the Act, then such an arbitrator cannot be appointed.
Thus, under the amended law neither government nor private companies can appoint their employees as arbitrators.

47. OTHER CHANGES

48. “(4) An arbitration agreement is in writing if it is contained in-
OTHER CHANGES: ELECTRONIC COMMUNICATION OF ARBITRATION AGREEMENTS : [SECTION 7(4)(b)]
“(4) An arbitration agreement is in writing if it is contained in-
“(b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means]* which provides a record of the agreement;”
* Inserted by the Arbitration and Conciliation (Amendment) Act, 2015, w.e.f

49. OTHER CHANGES: ELECTRONIC COMMUNICATION OF ARBITRATION AGREEMENTS [SECTION 7(4)(b)]  
After the 2015 amendment, now arbitration agreements communicated through electronic means will be deemed to be an arbitration agreement in writing.

50. OTHER CHANGES: SECTION 34: APPLICATION FOR SETTING ASIDE ARBITRAL AWARD:
The Amendment Act adds the following new provision :
Insertion of new subsection 2(A) in section 34: It provides an additional ground of patent illegality to challenge an arbitral award other than International Commercial Arbitrations.
Insertion of new subsection (5) in Section 34: An application for setting aside of an award is to be filed after issuing a prior notice to the other party.
Insertion of new subsection (6)in Section 34: A period of one year has been prescribed for disposal of an application for setting aside an arbitral award.

51. APPLICABILITY

52. APPLICABILITY OF AMENDMENT ACT :
Section 26 of the Amendment Act provides that it shall not to apply to pending arbitration proceedings. “Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act”.

53. APPLICABILITY OF AMENDMENT ACT :
The first part of Section 26 provides that the Amendment Act shall not apply to arbitral proceedings commenced before October 23, 2015 (the date of commencement of the Amendment Act), whereas the second part provides that the Amending Act shall apply ‘in relation to arbitral proceedings’ commenced on or after October 23, 2015.
Despite Section 26, courts differed on the applicability of the amendments to arbitration and arbitration-related court proceedings.

54. CONCLUSION :
It can be seen through the above discussion that the Amendment Act has been beneficial in eliminating the shortcomings and lacunas of the 1996 Act.
The role of the judiciary has rightly been curtailed and this will definitely lead to a faster process of arbitration.

55. The new law also makes the declaration by the arbitrator about his independence and impartiality more realistic as compared to a bare formality under the previous regime.
It can be said that the present amendments certainly travel an extra mile towards reducing the interference of the Court in arbitration proceedings that has been a consistent effort of the legislature since passing of the 1996 Act.

56. We hope you find this study of the amendments helpful and, as always, we are open to comments and suggestions.
THANK YOU