Brain Booster for UPSC & State PCS Examination (Topic: Arbitration and Conciliation (Amendment) Bill, 2021)

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Topic: Arbitration and Conciliation (Amendment) Bill, 2021

Arbitration and Conciliation (Amendment) Bill, 2021

Why in News?

  • The Lok Sabha has passed the Arbitration and Conciliation (amendment) Bill 2021 to replace an ordinance that enabled certain arbitral awards to be “unconditionally stayed”.
  • Law minister Ravi Shankar Prasad said the Bill seeks to check “fly-by-night operators” who take advantage of the law to get favourable award by fraud.

Ordinance in 2020

  • The Arbitration and Conciliation (Amendment) Ordinance, 2020 was promulgated on November 4, 2020. 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.
  • The Law Ministry ordinance said the amendment was necessary “to address the concerns raised by stakeholders after the enactment of the Arbitration and Conciliation (Amendment) Act, 2019 and to ensure that all the stakeholder parties get an opportunity to seek an unconditional stay of enforcement of arbitral awards where the underlying arbitration agreement or contract or making of the arbitral award are induced by fraud or corruption.”
  • The ordinance added a proviso in Section 36 of the Arbitration Act to effect this change to come into effect retrospectively from October 23, 2015.

Changes Sought in Ordinance

Automatic stay on awards:

  • The 1996 Act allowed a party to file an application to set aside an arbitral award (i.e., the order given in an arbitration proceeding). Courts had interpreted this provision to mean that an automatic stay on an arbitral award was granted the moment an application for setting aside an arbitral award was made before a court. In 2015, the Act was amended to state that an arbitral award would not be automatically stayed merely because an application is made to a court to set aside the arbitral award.
  • The Ordinance specifies that a stay on arbitral award can be provided (even during the pendency of the setting aside application) if the court is satisfied that: (i) the relevant arbitration agreement or contract, or (ii) the making of the award, was induced or effected by fraud or corruption.

Qualifications of arbitrators:

  • The Act specified certain qualifications, experience and accreditation norms for arbitrators in a separate schedule.
  • The Ordinance omits the Schedule for arbitrators and states that the qualifications, experience, and norms for accreditation of arbitrations will be specified by regulations.

Significance of Amendment

  • Till recently, an arbitration award was enforceable even if an appeal was filed against it in the court under Section 36 of the law. But the court could grant a stay on the award on conditions as it deemed fit.
  • As per the proposed amendment, if the award is being given on the basis of an agreement based on fraud or corruption, then the court will not impose a condition to stay the award and grant an unconditional stay during the pendency of the appeal if it has been challenged under Section 34 of the arbitration law.
  • The bill, according to the statement of objects and reasons, provides for "unconditional stay of enforcement of arbitral awards, where the underlying arbitration agreement, contracts or arbitral award is induced by fraud or corruption".

Arbitration for Dispute Resolution

  • Arbitration is a form of Alternative Dispute Resolution.
  • ADR methods enjoy significant advantages such as lower costs, greater flexibility of process, higher confidentiality, greater likelihood of settlement, choice of forum, choice of solutions etc.
  • Arbitration Law in India, is primary contained in the Act of 1996. An Act that was passed to consolidate the laws relating to domestic, international arbitration and its enforcement.
  • The arbitration provides an alternative mode of dispute resolution through an arbitrator. It includes a selection of the neutral third person who is an expert in the area of the arbitral issue. All the parties are bound by the rule and the time limits fixed by the arbitrator within which the dispute is to be settled.